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EMC Executives Defend Blockbuster Deal With Dell

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Jonathan Vanian
Jonathan Vanian
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By
Jonathan Vanian
Jonathan Vanian
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February 9, 2016, 6:31 PM ET
Dell EMC
Flowers grow near an entrance to an EMC building, Monday, Oct. 12, 2015, in Hopkinton, Mass. Dell is buying data storage company EMC in a deal valued at approximately $67 billion. (AP Photo/Steven Senne)Photograph by Steven Senne—AP
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EMC’s leaders want to make something clear to investors who worry that Dell’s blockbuster $67 billion deal to buy their company may fall though.

It will close on time, EMC lead director William Green promised, “unless an act of god happens.”

Green joined EMC CEO Joe Tucci on stage Tuesday at Goldman Sachs’ technology conference in San Francisco to give investors an update on the business technology giant as it prepares to be swallowed by tech titan Dell in October. Mostly, they wanted to reassure everyone that EMC is on track and re-emphasize that the acquisition is the best course for the company.

EMC’s shares (EMC) have dropped 15% since Dell made its acquisition offer in October amid a big downturn across the technology industry. On Tuesday, they closed down .12% at $24.17.

The newly merged company will have 38,000 “go-to market people” (otherwise known as salespeople) that will be able to capture new customers and cross-sell products and services of different business units, Tucci said.

“That is part of the reason why this kind of merger makes sense now,” he added.

After the deal closes, EMC and Dell will fill in gaps in each other’s portfolios that neither company could do on its own, Tucci argued. For example, Dell has an advantage selling to small and medium sized businesses and hospitals, whereas EMC specializes in selling to giant corporations.

A number of doubts around the acquisition revolve around VMware (VMW), the publicly traded business technology company housed inside EMC. Its shares have tumbled 39% since the acquisition offer, causing investors to grumble and question how the deal benefits VMware.

Dell CEO Michael Dell has called VMware the “crown jewel” of EMC’s portfolio of businesses. But despite that, VMware has faced a rough patch in recent months including laying off 800 hundred workers in January.

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EMC, which owns 80% of VMware, allocated its shareholders so-called tracking stock in VMware, with the idea being that shares in the faster growing VMware would be attractive to investors. However, some analysts have expressed concern that the tracking stock’s value has dropped so much in relation to EMC’s falling stock, that it’s now essentially worthless.

For more on EMC, check out our video:

Tucci conceded that the deal “has generated some angst among EMC and VMware investors, but he believes that overall, he’s “very comfortable this will be a great deal for all of you.” After the merger, he said the combined companies would help VMware “push its great software.”

Green added, “I do think there are people who just don’t get it yet, but as more people spend time on it they will see and understand why this is great for investors.”

About the Author
By Jonathan Vanian
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Jonathan Vanian is a former Fortune reporter. He covered business technology, cybersecurity, artificial intelligence, data privacy, and other topics.

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