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Dell Is Considering Selling Its 81% Stake In Virtualization Software Developer Vmware

Dell Is Considering Selling Its 81% Stake In Virtualization Software Developer Vmware

Dell Technologies is considering selling its stake in VMware, a developer of technologies in the field of virtualization and cloud infrastructure, writes the Wall Street Journal, citing knowledgeable sources. Dell owns 81% of VMware.

The market value of VMware as a whole is more than $ 62 billion, and Dell's stake in the company is worth $50 billion.

VMware was founded in 1998. Five years later, it was purchased by the EMC Corporation. In 2017, the IPO of VMware took place, in which 15% of Its shares were placed. EMC retained the remaining stake in the company, and it passed to Dell, with which EMC merged in 2016.

According to WSJ sources, Dell is considering splitting off VMware along with other options, including buying out the remaining stake in The company.

Dell and VMware are working with third-party consultants, and it is possible that following the consultations, Dell will decide not to take any action, according to the publication's interlocutors.

The first option that Dell considered was selling a stake in VMware to its shareholders, they say. It is currently assessing the potential consequences of such a move, including possible problems for corporate governance, as well as the way the two companies will interact after the split.

In any case, the deal is unlikely to take place before next year. Dell cannot divest its stake in VMware under the tax-free regime until September 2021, which is five years after the merger with EMC.

Dell's capitalization is just over $36 billion, while the market value of the company's 81% stake in VMware is about $50 billion. Based on this difference, we can assume that the market sees almost no value in the key business for Dell in the production of personal computers, as well as in the business in the field of data storage solutions.

The separation of Dell and VMware can increase the value of both companies, writes the WSJ. Selling a stake in VMware would also help Dell reduce debt, which currently stands at $48 billion.

Dell shares have been falling since the company returned to the open market in 2018, despite the fact that the Nasdaq Composite index of technology companies has grown by more than 50% during this time.

Information about the possibility of separating VMware led to an increase in the share price of both Dell and VMware. Dell's securities rose 8.5% in Wednesday's trading, while VMware's rose 2.4%.