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S&P: EMC ratings unaffected by acquisition
Standard & Poor's said Tuesday that its corporate credit rating and outlook on EMC Corp. (BBB/stable/--) would not be affected by EMC's announced acquisition of privately held VMware Inc. for $635 million in cash.
S&P said EMC had stated in the past that acquisitions will play a part in its strategy of increasing software as a percent of total revenues. VMware's virtualization technology will help EMC improve and simplify the computing and storage operations of its customers.
The deal is expected to result in a $15 million-$20 million charge for in-process research and development and add $650 million-$720 million of intangible assets and goodwill to EMC's balance sheet when the transaction closes, which is expected in the first quarter of 2004.
The ratings on EMC assume that the company might make other acquisitions to bolster its software presence. Given the company's $6.2 billion of cash as of Sept. 30 and its lack of funded debt, EMC has some flexibility to make acquisitions without negatively affecting the rating, the agency said.
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