EMC deal helps boost Dell revenue
Tech giant still burdened by the debt taken on in that acquisition.
Dell Technologies’ decision to buy data storage giant EMC Corp. is providing a boost to the Round Rock-based tech giant’s revenue.
Dell on Monday reported 19 percent year-over-year revenue growth for its fiscal first quarter, with revenue increasing from $18 billion a year ago to $21.4 billion. The company is the largest private employer in Central Texas with about 14,000 local workers.
The company said its revenue growth was driven by a 41 percent jump in its server and networking business, as well as 10 percent growth in its storage operations and 12 percent gain in revenue from VMware, a cloud computing company Dell acquired control of through the EMC purchase.
While Dell is privately held, it reports its finances due to a stock created from the $67 billion EMC acquisition in 2016. The stock, which trades under the tracker DVMT, rose by more than 1 percent on Monday following the earnings report.
“Roughly 20 months since the EMC transaction, we have many things going well,” Tom Sweet, Dell’s chief financial officer, said in a call with investors on Monday. “We are taking the right long-term steps, but we expect progress to be a multi-year journey.”
Despite its revenue boost since purchasing EMC, the company is still burdened by debt brought on by the acquisition, and it is still losing money.
Dell lost $636 million in its fiscal first quarter, down 46 percent from the same quarter a year ago but up from the $511 million it lost in its previous quarter.
Dell’s debt remains at $52.7 billion, unchanged from the previous quarter. The company has paid about $13 billion in gross debt since the EMC buyout.
Sweet said Monday that the company is “financially strong” and intends to pay down $5 billion in total debt this year.
Dell continues to weigh a variety of strategic options, including
whether to pursue an initial public offering or reverse merger with VMware in order to raise capital.
Weeks ago, Dell said in a securities filing that it is also considering converting private stock held by CEO Michael Dell and other investors into publicly traded DVMT stock, which would also be expected to raise money.
In April, Pivotal Software, a California-based cloud computing company in which Dell owns a majority stake, completed an IPO that initially raised about $555 million. Industry analysts have said the IPO could help Dell obtain some cash as it ponders future moves. Pivotal’s stock has risen more than 21 percent since the IPO, with the stock trading at about $18 on Monday.
Dell executives on Monday declined to discuss anything related to the options the company might be contemplating. Jeff Clarke, vice chairman of products and operations, said the company’s main focus is expanding its storage business.
“We know what we need to do,” Clarke said. “We have a wealth of riches in this organization. A large number of engineers have been doing this for a very long time, and they are more focused than they’ve ever been. I like our hand.”