A shareholders meeting on Tuesday decided whether to sell or not EMC Corp. (Nasdaq: EMC) to Dell Inc. The buyout was endorsed by 98 percent of EMC’s shareholders during the brief meeting. The companies still need approval from regulators in China, but the buyout is almost final. Although EMC’s suppliers are not comfortable with Dell’s delayed-pay reputation.
The president of the research firm Moor Insights & Strategy, Patrick Moorhead, says that EMC is a top seller company of corporate data-storage devices, which hold large amounts of digital information to corporate data centers. And Dell is the biggest American seller of servers that process EMC kind of data, which makes it a reasonable sell.
EMC Corp. buyout is worth more than $60 billion, and it was decided at the company’s headquarters in Hopkinton, according to an EMC official. At the meeting, it was also approved a multimillion-dollar golden parachute for EMC’s top executives, including the chief executive Joe Tucci, The Boston Globe reports.
Joe Tucci has worked for EMC for an extended period, and he announced he will retire after the sale is complete. According to The Boston Globe, Tucci said that the combination of Dell and EMC would create a powerhouse in the technology industry.
EMC was founded in 1979 and became the most valuable technology company in Massachusetts. EMC has about 53 thousand employees around the world and more than 9 thousand in Massachusetts. Last year EMC sales reached $24.7 billion and profits of $2 billion.
The Boston Globe says that industry analysts stated that the combination of Dell and EMC is a powerful one because each company compliments the other. But the challenge will be to maintain the stability of both businesses.
The new company will be named Dell Technologies Inc. and it seeks to enter the world of cloud computing, which requires sophisticated software to make server farms and data processing more efficient. According to the Boston Globe, Moorhead says that the goal of the takeover is that the 2 companies own big data and the private cloud.
Dell delayed-payments strategy to help finance its operations are not appreciated by EMC suppliers
Nasdaq reports that Dell is one of the most aggressive companies at delaying payments to fund its operations. Delaying payments create the possibility for Dell to pay quickly part of its massive debt that financed the EMC purchase, but it would mean that Dell Inc. will replace debt creditors with debt vendors.
Dell borrowed about $40 billion, and it will borrow another $5 billion to sell its IT services and software divisions.
Delaying the payment to EMC’s suppliers, along other efforts to improve EMC’s working capital, could provide around $1 billion extra income in the first year of the takeover, says Nasdaq regarding one estimate.
But an EMC supplier says that his company is not worried and stated that they trust the Dell/EMC merger.
Dell Inc. is not the only company that delays payments to its vendors
The Georgia Institute of Technology’s Financial Reporting & Analysis Lab reports that the average time to pay bills was 35 days in March, and 45 days in June 2009, among 3 thousand public companies.
SEC analysis revealed that other tech companies use the delayed-payment strategy as well: HP Inc. took around 88 days to pay suppliers; Apple Inc. took an average of 74 days and Hewlett-Packard Enterprise Co an average of 52 days.
Which explains why the EMC supplier that quoted Nasdaq is not preoccupied with Dell’s way of doing business.
Source: The Boston Globe