Dell partner CIT dodges bankruptcy

Replaced by Red Hat in the S&P 500 just the same


Financial services giant CIT Group, which dabbled just a bit too much in subprime mortgages, is on the verge of getting some $3bn in emergency financing from its bondholders in order to avert bankruptcy, according to Reuters.

There are two IT angles to this story. Firstly, CIT is a long-time partner of PC and server maker Dell, providing some of the backing on the leasing and financing deals that Dell does to peddle its iron. CIT sold off its 30 per cent stake in Dell Financial Services to Dell at the end of 2007 for $306m, making Dell the sole owner of the unit. CIT does still do some deals backing Dell leasing and financing, however.

Last week, at Dell's financial analyst day, company chief financial officer Brian Gladden said that CIT owes Dell $35m right now. He added that CIT typically does around $100m in financing per quarter for US Dell customers, plus some other financing in six other countries that were not identified.

CIT, like Goldman Sachs, converted itself to a bank holding company late last year, thereby in theory making it available for funds from the U.S. government's Troubled Asset Relief Program. There is apparently $2.33bn in cash designated to be pumped into CIT if it cleans up its books.

The $3bn in financing aims to do that, which in turn increases the odds that Dell customers can still get leases and financing through CIT - profitable leasing deals that CIT needs (among other things) to stay afloat, and that Dell needs to keep financing equipment and to spread out its risks in this down economy. CIT has $1.1bn in debt that becomes due in August and another $2.5bn at year's end, and has racked up $3.3bn in losses in the past six quarters.

The second IT angle on the CIT financial mess is that Standard & Poors will remove CIT Group from its index of 500 companies on July 24 and replace it with commercial Linux distributor Red Hat. CIT's plummeting stock price has put pressure on the S&P 500 index - the stock hit a year low of 31 cents per share last Friday, but has rebounded to $1.36 this morning on the news. But this is still well off the $13 per share it was trading at last September, when the economic slowdown started to kick in.

Red Hat should help stabilize it a bit, but is a much smaller company, even if it is in an inherently less risky business. Red Hat's shares hit a low of $7.50 last November, but are now at $22.28 a pop and climbed 9.1 per cent on the news last Friday that the company would be added to the S&P 500 index. ®

Similar topics


Other stories you might like

  • Ditching VMware over the Broadcom buy? Here are some of your options
    What's your contingency plan?

    Opinion Broadcom has yet to close the deal on taking over VMware, but the industry is already awash with speculation and analysis as to how the event could impact the cloud giant's product availability and pricing.

    If Broadcom's track record and stated strategy tell us anything, we could soon see VMware refocus its efforts on its top 600 customers and raise prices, and leave thousands more searching for an alternative.

    The jury is still out as to whether Broadcom will repeat the past or take a different approach. But, when it comes to VMware's ESXi hypervisor, customer concern is valid. There aren't many vendor options that can take on VMware in this arena, Forrester analyst Naveen Chhabra, tells The Register.

    Continue reading
  • Schneider and Dell integrate UPS, HCI for graceful shutdown
    For when the outage lasts so long that your UPS runs out of charge

    Schneider Electric has teamed up with Dell Technologies on an automated shutdown system for hyperconverged infrastructure (HCI), based on the integration of its APC PowerChute with Dell's VxRail HCI platform.

    According to Schneider, this new capability was developed as part of a joint effort with Dell to try to reduce the complexity of the hybrid IT environment.

    The idea is to ensure a graceful shutdown of all the virtual machines and their workloads operating on a VxRail cluster in a situation where mains power has failed, but the uninterruptible power supply (UPS) has exhausted its battery runtime.

    Continue reading
  • Will Lenovo ever think beyond hardware?
    Then again, why develop your own software à la HPE GreenLake when you can use someone else's?

    Analysis Lenovo fancies its TruScale anything-as-a-service (XaaS) platform as a more flexible competitor to HPE GreenLake or Dell Apex. Unlike its rivals, Lenovo doesn't believe it needs to mimic all aspects of the cloud to be successful.

    While subscription services are nothing new for Lenovo, the company only recently consolidated its offerings into a unified XaaS service called TruScale.

    On the surface TruScale ticks most of the XaaS boxes — cloud-like consumption model, subscription pricing — and it works just like you'd expect. Sign up for a certain amount of compute capacity and a short time later a rack full of pre-plumbed compute, storage, and network boxes are delivered to your place of choosing, whether that's a private datacenter, colo, or edge location.

    Continue reading
  • Linux Foundation thinks it can get you interested in smartNICs
    Step one: Make them easier to program

    The Linux Foundation wants to make data processing units (DPUs) easier to deploy, with the launch of the Open Programmable Infrastructure (OPI) project this week.

    The program has already garnered support from several leading chipmakers, systems builders, and software vendors – Nvidia, Intel, Marvell, F5, Keysight, Dell Tech, and Red Hat to name a few – and promises to build an open ecosystem of common software frameworks that can run on any DPU or smartNIC.

    SmartNICs, DPUs, IPUs – whatever you prefer to call them – have been used in cloud and hyperscale datacenters for years now. The devices typically feature onboard networking in a PCIe card form factor and are designed to offload and accelerate I/O-intensive processes and virtualization functions that would otherwise consume valuable host CPU resources.

    Continue reading
  • Dell unveils new XPS 13 devices with Alder Lake CPUs
    Best hedge against a slowing PC market? Take some design tips from Apple

    Dell has pulled the lid off the latest pair of laptops in its XPS 13 line, in the hopes the new designs, refreshed internals, and an unmistakably Apple-like aesthetic of its 2-in-1 approach can give them a boost in a sputtering PC market. 

    Both new machines are total redesigns, which is in line with Dell's plans to revamp its XPS series. Dell users considering an upgrade will want to take note, especially those interested in the XPS 13 2-in-1: There is quite a bit of difference, for both enterprise and consumer folks. 

    The XPS 13 maintains its form factor – for the most part – but gets a new smooth aluminum chassis that makes it look more like a MacBook Air than ever. Not that that's necessarily a bad thing: the new design is reportedly lighter and thinner, too. 

    Continue reading
  • openSUSE Leap 15.4: The best desktop on the RPM side of the Linux world
    The Reg FOSS desk takes the latest stable distro for a spin

    Review The Reg FOSS desk took the latest update to openSUSE's stable distro for a spin around the block and returned pleasantly impressed.

    As we reported earlier this week, SUSE said it was preparing version 15 SP4 of its SUSE Linux Enterprise distribution at the company's annual conference, and a day later, openSUSE Leap version 15.4 followed.

    The relationship between SUSE and the openSUSE project is comparable to that of Red Hat and Fedora. SUSE, with its range of enterprise Linux tools, is the commercial backer, among other sponsors.

    Continue reading

Biting the hand that feeds IT © 1998–2022