Dell said to be looking into VMware spinoff: Report

The Wall Street Journal is reporting that Dell is looking at what to do with its stake in VMware.
Written by Chris Duckett, Contributor

Dell is reportedly looking at its VMware stake, and what to do with it.

According to The Wall Street Journal, the primary option being considered is to spin out VMware to shareholders in Dell. However, with all options seemingly on the table, the Journal further stated that Dell could look to increase its stake in the virtualisation giant, or do absolutely nothing at all.

Dell gained its stake in VMware in its 2016 merger with EMC, with the transaction costing around $67 billion.

See also: How to run a company like Michael Dell: A lesson in mergers, acquisitions, and cultural alignment

Any movement on the VMware front is unlikely before September 2021, since that is when Dell would be able to do so tax-free, the Journal reported.

Dell Technologies did not provide comment when asked.

In March, both Dell Technologies and VMware pulled their 2021 fiscal guidance due to the coronavirus pandemic.

"While the company currently is seeing heightened interest in work from home solutions and continuing execution in its global supply chain, and remains confident in its liquidity position, the company is unable to predict the extent to which the global COVID-19 pandemic may adversely impact its business operations, financial performance and results of operations for the current fiscal year," Dell said in an SEC filing.

A month prior, Dell reported fourth-quarter revenue of $24 billion, up 1% from a year ago, with earnings of $416 million. For the whole year, Dell Technologies reported revenue of $92.2 billion, up 2% from a year ago, with net income of $5.5 billion.

In order to complete its EMC merger, Dell had taken on a mountain of debt, and at the end of its 2020 fiscal year, the company reported $44.3 billion in long term debt.

VMware reported in February that it passed $10 billion in sales for FY2020, an increase of 12%, while non-GAAP net income was $2.66 billion. The company signed a record 31 agreements with value above $10 million in its fourth quarter.

"As of May 1, 2020, Dell controlled 80.6% of VMware's outstanding common stock and 97.4% of the combined voting power of VMware's outstanding common stock," VMware said in its earnings report.  

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