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As Dell Buyout Looms, EMC Reports Flat Q4 Results

The biggest tech deal ever "remains on track," CEO Joe Tucci says.

Ken Wolter / Shutterstock

Shares of data storage equipment company EMC opened at their lowest levels since it announced its intention to be acquired by Dell after reporting fourth-quarter earnings that were in line with expectations and revenue that declined slightly year on year.

EMC shares opened for trading on the New York Stock Exchange at $23.76. Privately held Dell has proposed to acquire EMC in a deal worth more than $60 billion, which includes a cash payment to EMC shareholders of $24.05 per share.

On a conference call, CEO Joe Tucci said “progress to close the transaction remains on track on the original terms and timeline.” The companies have said they expect to close no later than October.

Tucci said EMC remains confident that Dell and its partner Silver Lake will have no difficulty raising the financing required to complete the buyout. Dell has proposed to raise nearly $50 billion in debt to pay for EMC. A falling appetite for corporate debt among bond investors, combined with the 15 percent decline in EMC’s share price since the deal was first announced on Oct. 12, has triggered worries that the terms might run into difficulties.

“We are highly confident in the contractual terms we have in place, that we will meet those contractual terms. There are significant penalties in place both ways if this doesn’t happen. The banks are fully committed,” to fund the debt placement, Tucci said.

EMC posted per-share earnings of 65 cents on revenue of $7 billion. Revenue from the sales of products declined 5 percent year on year to $4.1 billion. Services revenue grew 6 percent to $2.9 billion. It finished the fiscal year with sales of $24.8 billion, up 1 percent from the prior year.

The company said sales in its main information infrastructure business fell 4 percent year on year to $5.1 billion, or 1 percent after adjusting for the effect of currency exchange rates. Sales in North America and Asia were flat, and fell 16 percent in Latin America and 1 percent in Europe.

EMC named Denis Cashman, its chief accounting officer, as its new CFO. He will replace Zane Rowe, who was tapped as the new CFO at VMware, the EMC-controlled cloud software company.

Revenue at Pivotal, an EMC-owned software company working on big data and analytics products, rose 25 percent to $82 million and finished the year at $267 million, or about 1 percent of EMC’s overall revenue.

Separately, antitrust regulators in the European Union said Tuesday they expect to rule on the deal by Feb. 29.

Update: We edited one of Tucci’s quotes above following the release of the official transcript.

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