{"id":23869,"date":"2021-04-15T05:13:29","date_gmt":"2021-04-15T05:13:29","guid":{"rendered":"https:\/\/rbsitsoftwaresolution.com\/blog\/dell-is-spinning-out-vmware-in-a-deal-expected-to-generate-over-9b-for-the-company.html"},"modified":"2021-04-15T05:13:29","modified_gmt":"2021-04-15T05:13:29","slug":"dell-is-spinning-out-vmware-in-a-deal-expected-to-generate-over-9b-for-the-company","status":"publish","type":"post","link":"https:\/\/www.rbsitsoftwaresolution.in\/blog\/dell-is-spinning-out-vmware-in-a-deal-expected-to-generate-over-9b-for-the-company.html","title":{"rendered":"Dell is spinning out VMware in a deal expected to generate over $9B for the company"},"content":{"rendered":"

Dell<\/a> announced this afternoon that it\u2019s spinning out VMware<\/a>, a move that has been suspected for some time<\/a>. Dell acquired VMware as part of the massive $58 billion EMC acquisition<\/a> (announced as $67 billion) in 2015.<\/p>\n

The way that the deal works is that Dell plans to offer VMware shareholders a special dividend of between $11.5 and $12 billion. As Dell owns approximately 81% of those shares that would work out to somewhere between $9.3 and $9.7 billion coming into Dell\u2019s coffers when the deal closes later this year.<\/p>\n

\u201cBy spinning off VMware, we expect to drive additional growth opportunities for Dell Technologies as well as VMware, and unlock significant value for stakeholders. Both companies will remain important partners, with a differentiated advantage in how we bring solutions to customers,\u201d Dell CEO Michael Dell said in a statement.<\/p>\n

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$67 billion Dell-EMC deal closes today<\/a><\/p>\n<\/blockquote>\n

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While there is a fair amount of CEO speak in that statement, it appears to mean that the move is mostly administrative as the companies will continue to work closely together, even after the spin-off is official. Dell will remain as chairman of both companies.<\/p>\n

In a presentation to investors<\/a>, the companies indicated that the plan to work together is more than lip service. There is a five-year deal commercial agreement in place with plans to revisit that deal each year thereafter. In addition, there is a plan to sell VMware products through the Dell sales team and for VMware to continue to work with Dell Financial Services. Finally, there is a formalized governance process in place related to achieving the commercial goals under the agreement, so it\u2019s pretty firm that these companies will continue to work closely together at least for another five years.<\/p>\n

For its part, VMware said in a separate release<\/a> that the deal will allow it \u201cincreased freedom to execute its strategy, a simplified capital structure and governance model and additional strategic, operational and financial flexibility, while maintaining the strength of the two companies\u2019 strategic partnership.\u201d<\/p>\n

Dell shares are up more than 8% following the announcement. The company intends on using parts of its proceeds to deleverage, writing in a release that it will use \u201cnet proceeds to pay down debt, positioning the company well for Investment Grade ratings.\u201d By that it means that Dell will reduce its net debt position and, it hopes, garner a stronger credit rating that will limit its future borrowing costs.<\/p>\n

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Unpacking how Dell\u2019s debt load and VMware stake could come together<\/a><\/p>\n<\/blockquote>\n

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Even when it was part of EMC, VMware had a special status in that it operates as a separate entity with its own executive team and board of directors, and the stock has been sold separately as well.<\/p>\n

The deal is expected to close at the end of this year, but it has to clear a number of regulatory hurdles first. That includes garnering a favorable ruling from the IRS that the deal qualifies for a tax-free spin-off, which could prove to be a considerable hurdle for a deal like this.<\/p>\n

The transaction is not a surprise. The company has been open about its intention to shake up its broader corporate structure. And with Dell bloated in debt terms and, perhaps, in product scope as well, the VMware deal could be an intelligent way forward. Dell investors are more excited about the transaction than VMware shareholders, with the latter company\u2019s stock is up a more modest 1.4%.<\/p>\n

VMware\u2019s most recent earnings release notes that it had $4.715 billion in \u201ctotal cash, cash equivalents and short-term investments.\u201d Perhaps its shareholders aren\u2019t enthused at the prospect of levering VMware\u2019s balance sheet to help Dell do the opposite.<\/p>\n

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Dell\u2019s debt hangover from $67B EMC deal could put VMware stock in play<\/a><\/p>\n<\/blockquote>\n

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\u00a0<\/p>\n

Article source: http:\/\/feedproxy.google.com\/~r\/techcrunchIt\/~3\/ydGfi_UHYaw\/<\/p>","protected":false},"excerpt":{"rendered":"

Dell announced this afternoon that it\u2019s spinning out VMware, a move that has been suspected for some time. Dell acquired VMware as part of the massive $58 billion EMC acquisition <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[19],"tags":[25],"class_list":["post-23869","post","type-post","status-publish","format-standard","hentry","category-enterprise-software","tag-enterprise"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t