where vmware has an unbelievably strong position, the way to connerization, which vmware is also wellr, you are seeing the anchor tenant in all of that is the commute engine. they are talking about at least a billion dollars in revenue synergies as a result of controlling vmware. cost synergy is not detailed but they are expected to be significant. that becomes important when you take on an additional $45 billions in debt. that's what dell is going to the capital markets for. banks have lined up to commit that in bridge financing that will be replaced by bonds. the bank lists goes on for quite a few pains. it is certainly a reflection of strength in the debt markets at this point. much of the borrowing to be done as investment grade, not high-yield. it will bring the leverage ratio of dell up to four times before those synergies. still, enormous. $3.5 billion is what i'm hearing will be the additional equity contribution of dell and its partner silverlake. they also brought in temasek, and there's the go shop here, for 60 days, they can scout a better offer out there. unlikely they wi

it could leave vmware and its shareholders in limbo. patrick is the ceo of vmware.ays great to see you, pat. >> good morning, john. great to see you as well. thank you. >> let's dive in. from where vmware fits in this dell-emc potential deal that's evolving, it looks like you're being used as an atm to help fund this deal. like there are going to be a lot more owners of the stock who may or may not want it and won't have voting power, and investors seem to be bummed out by that prospect. is there a different narrative that you can tell about this? >> you know, obviously to us the deal is about growth and having dell and emc come together in a larger entity, you know, accelerating the growth, we think this is a huge opportunity for us in the mid and long-term. obviously a deal of this magnitude, john, there's volatility around it. there's questions around how that will work, but ultimately we see that increased liquidity of vmware in the marketplace will be a good thing. allowing us to attract a much broader set of shareholders over time, but as we move past this per

david: an important part of that is vmware. talk about that company. we were reporting, 40 times earnings for emc. i will not pretend to be an expert in what they do, but it got emc into an area they had not been before. they were the data storage center. when amazon came along with cloud computing, and you did not aed something the size of refrigerator to control data storage, they started to struggle. vmware was the best thing emc had going. they will have a majority of the aware, going forward. david: you talked about the debt that dell is taking on. talk about the timing of that, why this is perhaps a good time for that. >> this is getting ahead of any interest rates height -- interest rate hikes that could be coming later this year. jamie dimon said that the financing is there. banks will syndicate the loans. it is a concentrated deal, but we can get it done. david: jeff mccracken, head of global m&a, thank you. for more on the deal, we are joined by abhey lamba, analyst with mizuho securities. i read that this would create an enterprise solutions

no one thinks it can be done unless they sell vmware. the worth is very little versus vmware. this is a way for dell to boost its value if they can get it. >> it is no tt a way for dell t go public or a wholesale spin so they can dpet tget the storage business. >> david, it is so big. >> i am calling it an lpo. it is not necessarily by a private equity firm. it is by a private leverage company in dell. i have to admit. it is curious in some ways. they believe they can get it done. they have been talking for months. this is not something that has just popped up. it was reported by "the wall street journal" and bloomberg, which brought it to our attention. we are giving you a lot more details. >> all the reports are sketchy. i have been saying, listen, until you have this story, i don't believe it. it is too big. >> it is enormous, jim. it does appear to be something they believe they can get done. >> it will change the valuations of both companies. >> it could be as little as a week away in terms of a deal. whether you get to the finish line and all the different things, there

vmware has to be avoided.hat is a good theme. >> re/code said they tried to unload the pc business to hp. >> i heard that yesterday. silverlake made calls. i find it hard to believe they were going down that road. it's a huge revenue number. still his baby. i'd like more information on that and find out what is behind that. i heard that but didn't pursue it. >> under armor losing their coo and cfo who has been a company vet for about 11 years, dickerson, leaving to pursue an opportunity outside the athletic performance area. having just made some big bets on fitness technology, my fitness app. >> yeah. i think that, you know, under armour is saying buy the stock. it was before we saw this news. i like under armor very much. morgan stanley price target goes up. let this settle. people always have some sort of nonsense. this is kevin plank's show. i'm not backing away. this is a great long-term buy. kevin blank runs a tight ship. i don't care about who leaves, as long as it's not kevin plank. >> he's the man. >>

emc is trading higher, but vmware is sharply lower.tting much of a lift because we have been talking about this deal now since last week. the premium we're looking at is about 28% if you look at the price before reports of this deal first began to surface. vmware is lower, we will see shares of this tracking stock issued for about nine dollars a share. it sounds like there is concern about more supply of the shares coming to market with these tracking stocks -- striking shares being released. that appears to be what's putting pressure on vmware. the company came out with numbers this morning for earnings, its guidance on earnings above what analysts had forecast. that's not helping the stock. i was watching shares of oracle, i reported earlier that oracle will not step in to try and make competing bid for emc. most analysts say they don't expect any competing bids for the company. all of this caps off what has been a very fertile time for m&a and technology. take a look at my bloomberg terminal, i have a five-year look at m&a quarter b

with certainly a novel structure to say the least. >> we'll talk to vmware tomorrow on "squawk alley.ks, david. >>> meantime republican front runner donald trump speaking in manchester, new hampshire today. eamon javers has been watching that for us. >> donald trump is speaking before this no labels convention in new hampshire. as you say he's moved on to the question and answer portion of his remarks here, but this is a bipartisan group really focused on problem solving and getting rid of all the partisan infight thag we see in washington. so what we see here is different audience for donald trump and a bit of a different speech for trump. he began by citing successes in development talking about his ability to work with new york city, city councils and working with public unions, all of those elements he says of his ability to do deals and get a problem solved. that an appeal to this group which is expressly about just exactly that. also this morning donald trump teasing the debate organizers of the democratic party debate, which is happening tomorrow night saying their ratings are

to point outeful is that what has save them is the $625 million acquisition of vmware, not a fifth the billion dollar deal. emily: it will be interesting to watch how they treat vm going forward.

>> i think this vmware tracking stock is hard to fathom.that worked, other than it knocked down vmware, the growth portion of vmc. otherwise, what people feel is this just a server company at a time when pure technologies are offering a better alternative than emc. people are not excited. people were saying, wow, it's really worth 33, why sell it? vmware, as a tracking stock, is going to be hard to fathom. the deal will take a long time to close. i prefer looking at the anheuser bush deal, which will happen, and i like molson and constellation brands. >> why do you think that deal will happen? because of who the big owners are on board? >> it is such a natural to be able to link -- neither of these beers is growth. you have to merge bud and sab, because the only beer that's doing well now is mexican beer. these are just about cost cutting. i like this deal very much. it will get done. >> jim, at what price does it make sense? at what price does it stop making sense? >> great question. this is one of these deals where it can go up 5%. this b

. >> you mean like a vmware today? >> that's another -- wow.orvo, skyworks solutions, western digital, seagate, intel, sandisk, micron, they're all getting crushed. >> their addressable market will grow as a result of the deal and who they're selling to is also getting larger. emc dell is one example. it's going to be a larger company. >> we're going to talk about vmware a little later in the program. >> disgusting. >> nine down grades. >> the most in a single day. >> they bagged so many people. >> we have to talk about that but before we go, the lamb research deal i want to -- >> that's a brilliant deal. >> why? >> why is that a brilliant deal? because lamb research bought novellus at the right time. kla selling a at good time but this is about having critical mass and being able to destroy applied materials. david, you talk about china, i think the chinese are going to drag their feet on approval of this. it matters tremendously because china is trying to put together a johnny-come-lately competitor to these, but this is going to be a strong

the shares of vmware down three bucks after hours and they are still selling off. chang is in austin, texas for the dell world conference, but she sat down with george colony to get his thoughts on the megadeal with dell, whether it is likely the largest tech deal ever will happen? >> it will be very difficult to pull off on a cultural level, on a financial level. what is happening, in the i.t. space, you have an aggregation of these very large players. this is the first of many deals we will see in the i.t. space. when i say i.t., i am differentiating that from the business technology space, which is what companies are building for their customers. i think this will be very big, powerful to get over. emily: you referenced hp and compaq. you said this took carly fiorina down. why won't does not take michael dell down? george: he is like the little train that good. he just kept growing and growing. he just showed an aptitude for proving me wrong and he is not very flashy, but he has a very good strategy. it does not mean it will be totally successful, but if anyone

a stake inssume vmware which will remain a publicly traded company. joining me now is a partner at greylock capital who worked there for a decade and alex sherman, our m&a reporter at bloomberg. lay it all out for us. dell is one ofis several large, legacy tech companies who in many ways best days are behind them and they are trying to figure out what is the next depth forward for us. part one of that plan was to go private and refocus on the enterprise segment to get away from what we all know dell as from a consumer pc product company to a company that services information technology too small and medium-size businesses. emc is a large enterprise company and whose core competency is storage rather than -- emily: do you see them getting out of the business? jerry: pcs are declining and everyone's moving to a mobile, tablet world. why would you become a more low-margin pc business to pursue the storage business? ofly: what is the amount that they are taking on? alex: i wish i knew the answer to that. meg whitman just put out a memo -- take this with a

the vmware business will become an independent company, no premium paid there.fore that. we're coming off six straight days of equities. it's a mixed showing, but we expect a higher opening for the dow industrials. and in trading, mixed trading, and the cac quarante down 15. the dax index continuing to bounce and recover from a huge selloff earlier in the year up about 28. the shaping high composite up 3% the chinese government talking about new lending opportunities in the banks and trying to open up banks there. and hang seng up, and korean kospi. nobel prize awarded this morning, deeten . the hit by chase utley, he was penalized for that, that led to the broken leg of the short stop ruben tejada. and beating up the, dallas texas. a water spout ruined a tractor-trailer on the skyway bridge. it became a tornado as it hit a u.s. postal service truck. no injuries reported there. big bank earnings are underway tomorrow for this third quarter report followed by bank of america, wells fargo. they're expected 8.4%, but that's way down from the 14.8% expected at the b

know, they own a significant, almost 81% economic interest in vmware.ll come out to finance the transaction. when you put those pieces together, it makes her a collocated transition -- transaction,, given the signs. betty: as you say, this is the biggest tech deal ever. is that why it will take so long to close on this? anand: that is part of it, for sure. the size, complexity, financing required, regulatory approvals that need to be met. all of this makes her a longer closing process. in our view, this is a must to do deal for both emc and perhaps even dell. exposed to aically shrinking area of corporate i.t. and network storage. the fact that they came together diversifies both platforms. more importantly, what has to happen after the deal closes is they have to undergo a significant amount of reengineering to be relevant to the cloud model. betty: in your view, how does this affect ama and tech? anand: the fact that this is as large and complex as it is, as interesting and convoluted as it is is a testament to the market right now. if you look at the

chipotle discover financial and vmware. you have september housing starts and building permits coming out and the american petroleum institute will releases weekly crude inventory numbers. >> we look at how a fat finger error almost cost deutsche bank $6 billion. that's coming up after the short break. >>> u.s. futures imlying a lower open. apple ceo says it's streaming service has 6.5 million paid users in the first measure of its success and starbucks could be set for an eu fine over it's tax policies but will it be more of an expresso than a grande latte? >> i still don't use the venti. i just say i'd like a large. >> the smallest one is called tall. which dives me mad. >> that's because small is still not small. small means that. it doesn't mean that. >> exactly. so i agree. i think those names are confusing and misleading. >> the lender mulls the sales in central and eastern europe under it's subsidiary. this according to reports in the media but no decision has been made yet. a key contract for the vienna arm of the g

this is an activist investors story, the emc owns about 80% of vmware. they wanted to do a spinoff of instead, maybe this is another option, the deal could be announced by monday. scarlet: we'll have more of this later, in the meantime, what is coming up. ♪ [laughter] scarlet: increased expectations or a downturn in the u.s. according to the survey, the probability that the u.s. will in turn recession cash will enter recession has increased 15%. what do you make of that, are we that fragile that a recession is likely? >> know, those people predicting 10% were wrong. increased in their projections and they are still around. i do not see a recession this year or next year. joe: why are you not more worried about china and market volatility? >> the u.s. economy is only a little bit impacted by exports, imports are majorly impacted and commodities that are produced in the u.s. are impacted, but lower exports only impact is a little bit. that's us a little bit. the key thing to look at is home sales and they are fine. let's talk about housing, we have a chart

obviously emc owns the majority of vmware. pay in cash for emc.share for vmware which is worth about 53% of the company. that should be about nine dollars. you are going to see what is happening to emc's stock. it is down. it doesn't look like investors are particularly thrilled. it looks like it is going to be about $67 billion. let's take a look at futures right now. not a lot of movement here. these are the many contracts swinging back-and-forth between gains and losses all morning. europe is negative. asia was positive. a lot of talk about the fed. you had a number of fed officials come out and support the view that there will still be a rate increase this year. guess who doesn't agree with them? wall street. traders are betting a 40% chance that the fed will move in december. there is more like a 62% chance that they will move in march. even if officials come out and try to reassure the market -- they are saying, we don't buy it. vonnie: the washington post says iran's conviction of the tehran correspondent is contemptible. more than aheld fo

shares of emc are rising in after-hours, along with vmware, that could be tied to the deal.ory johnson is in the newsroom. you have been digging through the numbers. what do you make of the price and speed at which this deal may be done? cory: we will see. this is a hard deal to imagine. it is about a $64 billion market cap acquisition for dell. they don't have that kind of money. they have nowhere near that amount of money. this is a minnow swallowing a whale. just look at the size of dell's business. we know dell already has a ton of debt. of course, the company was taken private in large part through borrowing money. if you look at the size of dell's business, it has about $12 billion in debt, given an enterprise value of maybe $25 billion. they are trying to buy a $54 billion company. to get to those numbers, $12 billion in debt, $23 billion enterprise value, that is an estimate from bernstein. emc is a $55 billion company. how does a $23 billion company buy a $55 billion company? by borrowing loads of money. that's michael dell's play here. emily: what does this mean fo

if dell were to simply buy it and sell vmware shares, that's not a tax efficient way to do it.al might be largely cash and this stub of vmware given to emc shareholders, all of which they hope will combine to a price where they will say, okay. >> you don't want the traditional array business of emc, the storage business what about the off-shore cash? bid could go much higher. >> it's not clear they can access that cash in an effective manner. i never put it pass a lot of these tax lawyers to figure out ways go about doing it, but that does not seem to be part of what they're aiming for. you can borrow against it, that's helpful. >> this is one where i was telling people on "mad money" that i feel the upside is complete on emc, but you tell me there could be more. >> we will see. if you end up with a deal worth 30, 31, do share holders of emc say that's enough? what does elliott say? they are only a 2% holder, but they can agitate. i don't have all the answers. as we didn't yesterday. but this is still moving ahead. we may see something sooner rather than later. this is one wher

. >> another stock on the move is vmware.hares are at session lows, down 20% after posting current quarter revenue forecast that came in well below consensus. this prompting a slew of rating and price target cuts from various brokerage firms. but keep in mind the softwaremaker's last quarter earnings and revenues were in line with expectations. remember, vmware's parent company emc is being acquired by dell. the stock is down 33% this year. mandy? >> thank you so much for that. see if you can guess this, folks. it is the best performing midcap stock this year. it is up a whopping 150%. that mystery chart is still ahead on "power lunch." you can tweet in your ideas if you've got them. >> up mex, power pitch jams out. >> it's the easiest way to learn to play guitar. >> are you trying to disrupt the instrument. >> or skip this beat. >> as a beginning guitar player, how am i going to justify that price point? >> stay tuned to find out. job a developer! its official, i work for ge!! what? wow... yeah! okay... guys, i'll be writing

formed, the so-called collar, a way of protecting the sellers from big fluctuations in price, $88 for vmwarethat is a software provider that is controlled i emc. it helps run your software more efficiently on storage and networks and servers, and it is controlled. therefore we see a little bit more complexity. is all of this complexity trying to soothe one key investor, one key activist investor, elliott management, who has been trying to push for emc to split itself up and create more value. let's have a look at what value it brings to dell. two years ago it took itself private to do exactly this, to come away from the glare of shareholders, to be able to restructure itself, to reset itself or purpose in a new technology ecosystem. michael dell and silver lak e made the company ofvate, so what is to become hewlett-packard and ibm? they could give them a run for their money to become one of the biggest providers in the enterprises computing products. dell already has a software and i.t. services. indeed, the servers. but with this, it adds a storage. there are challenges, and this is what's

it is a new security being formed, tied to the value of vmware.anagement is already pushing emc to break themselves up, and this is in line with their thinking, being driven towards a buyout. let's have a look at what's in it for dell -- two years ago they took themselves private, the founder buying it up. the sale could actually help scale this company with the faster growing storage business. dell already has the pc market going for it, servers, this is about adding storage to that collection and being able to offer more of a full array of products. they want to take on rivals. could create one of the biggest providers of enterprise in the computing business. clearly, a big juggernaut are somely but there challenges and this is what we have to dig into. we will see financing erase $40 billion worth of a high-yield company. could it have its limitations? ofy have to sell in terms bonds and leverage and the bond market has been trying up. that will be a bit of a cut on how much it could go in terms of premiums. bonds of emc have been dropping. the

. >> i wish i could help you of had i cannot recommend vmware.'s go to michelle in massachusetts. michelle. >> caller: it's michelle from cape cod. i'm calling to ask you about merck. i bought it at 56. should i hold or sell? >> unfortunately i have no catalyst. at one point today it was down because of eli lily, guilt by association. without a catalyst for merck, i don't know why i should pound the table for it. wally in ohio. >> caller: good evening, this is wally world from toledo, ohio. >> how are you? >> caller: doing really good. i go back to the days of mark hain haines. >> the 20th anniversary of "squawk" coming up. we'll participate. what's going on? >> is boot made for walking? >> it is rather amazing. boot reported a great quarter. it happened to be caught up in the he found high growth going toward value. that's what killed it. i'm a buyer of boot. . that, ladies and gentlemen, is the conclusion of the lightning round. [ buzzer ] >> announcer: the lightning round is sponsored by td l about understanding patterns like the mail guy at 3

they rose 8% in after hours while vmware was up 1%. there's the price action in germany today. it's similar for both although vm ware fractionally below flat. >> costolo has a new gig already. he scored a job with silicon valley. the hit hbo sitcom about six young men that create a tech start up. well, he is a contributor to the program working on its upcoming third season. silicon valley creator mike judge says he consults on story lines. costolo is no stranger to comedy. he did improv in security before moving to the bay area and then becoming twitter's ceo. that's multitalented. >> i've never seen that show. >> i haven't yet but i heard it's very good and a very accurate portrayal of tech start ups. trying to get funding and all. >> it's one i've got to get to. >> speaking of getting to, let's talk about sony beating it. get it? sony, michael jackson? they're set to part ways with michael jacksons estate. we'll explain why after this short break. (vo) what does the world run on? it runs on optimism. it's what sparks ideas. moves the world forward. invest with those who see t

private a few years ago, and also does virtualization specialty out of palo alto, emc owned a stake of vmwarehere dell gets a stake at that, but shares were down 9% in the early going this morning. recode is reporting that twitter is going to lay off employees across all departments. sometime this week. twitter is not commenting on that, the company just named cofounder jack dorsey as its permanent ceo. twitter has certainly been struggling over the past year to grow its user base which leads to revenue growth problems as well. many have called on twitter to trim its ranks. it's 4000 employees, shares of the company, done a little bit early in the gone. stock market coming off the best week of 2015, could be a challenge to keep that going, let's look at the big board and see how we are doing so far, pretty flat, dow lower by five points, nasdaq up by 4, the s&p is down by 1 point. >> still trying to wrap my arms around, $60 billion? >> a lot of debt that dell is taking on. they do have people backing them on this. they are a private firm so they don't have to worry about public shareholders g

emc owns bmware, this is cutting edge and i think if dell does this deal it's more for the vmware andnteresting to see what they do with the vmware if that's part of the deal if they take the whole thing private. that's what i think people will are watching. stuart: okay, back to you nicole ed. nicole: all right let's do lumber liquidators. it's down 80% this year. 7.7, at the moment, this makes a deal. they admit deals. you remember they're importing lumber that's allegedly from forests that were illegal so they're admitting guilt and with that, some of the money goes to national fish and wild life foundation and rhinoceros and tiger conservation fund and it's a small pop today. stuart: that's not a sentiment of the idea that the toxic fumes come up from the floorboards? >> no, there is no reports of this, that's from the formaldehyde, this is just the wood. stuart: tune in 5:00 sharp, 5:00 eastern lauren and nicole start your day in business. next case, mike brought us, that would be mike murphy sitting to my left, not my political left, by the way, a couple of picks, stocks that he

holder, a biggest majority shareholder in vmware. toy will give protections the likes of emc stockholders. they will it short that they get a certain price point if there is disruption and the market. stills what they are negotiating. this is what is taking them long into the sunday evening. the boards of these companies. mgnt seeking the emc deal. let's look at what is in it for dell. the privately owned company taken private by silver lake and michael dell himself. this is what emc really is. it is about driving in to storing and managing data, making it more lucrative. diversifying it from just a away from the pc market. they will dig into that more lucrative era of enterprise. that is where the money is. create one of the biggest providers of computing products. this is what we have got to keep a keen watch on. we will get the detail of the price. the deal is in the works and has been for the past week. dell will need cash to pump into this to be able to pay the $25 in cash for the company. high-yield limitations. the high yields

you add to that the incredible vce, thisrom vmware, is a dream commendation.nation.am illegal -- emily: george looked at you yesterday and said that compaq took them down. michael: we spent one year working on this. we looked at it every which way. i am confident we are building an incredible company. just af all you have whole different dynamic as compared to other big transactions. -- obvious differences difference is some of those other transactions did not have principles of the center -- at the center. i've think -- i think the overlap for the companies will work. this is not about combining existing businesses, there is a piece of that. posted together very well. this is very much about how we address the challenge and opportunity for our customers have any iger -- have any future . emily: how quickly will you pay off this debt? michael: i think what you will see in the first 18-24 months, a rapid deal of merging -- emerging. as we go through our process. we did this when dell went private. we are determined to take the steps necessary with both revenue

that's cash plus tracking stock linked to emc's interest in vmware. michael dell will lead the combined company as chairman and chief executive. the deal, which needs approval from em c shareholders expected to close next year. the company will be a powerhouse in the data storage industry. that's a $36 billion market according to idc. brent braceland, an analyst at pacific crest, says this deal speaks to a bigger, broader trend that investors need to keep in mind. consolidation is coming to the i.t. hardware industry, he says, so companies selling servers, storage, networking equipment, many of these companies still do generate a lot of cash, but their stock prices are under pressure because of the threat from newer technologies like cloud computing. braceland highlights two companies for us to watch. one is net app, dat that storage company could generate $1 billion in cash flow next year and be worth north of 35 bucks a share in a consolidation scenario he says. that stock down some 20% already this year. the other is tara data which braceland says

so ultimately they would be buying emc for the storage and then eventually probably spin off the vmware piece. >> they don't have $50 billion. >> it would be a 1-2 punch in terms of some sort of debt financing and they'd have to communicate this to investors but this is a disaster situation for emc shareholders in our opinion. they have been a horse and buggy in the right lane and now you have dell looking to merger emc. >> but there's two structures on the table. one is with them effectively buying emc, if you will. the other is dell going public through emc. >> yeah. so i think it's more them. i think the one that seems most likely is that sort of merger and then they spin off. >> dell becomes a publicly traded company that effectively controls where it goes. >> exactly. that's how we see this and and both have storage and move from a consumer to an enterprise company and this is given the options from an emc perspective. elliott has put a lot of pressure in for them and that's been burning and they're worried about if they have napkins in the kitchen. there's an ult may tif that they