Sign In
April 14, 20214:49 PM PDT
Technology
Dell spins off VMware stake, generating up to $9.7 bln to pay down debt
Reuters

3 minute read
The logo for Dell Technologies Inc. is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 10, 2019. REUTERS/Brendan McDermid
Dell Technologies Inc (DELL.N) said on Wednesday it would spin off its 81% stake in cloud computing software maker VMware (VMW.N), in a move that will help the PC maker reduce its debt.
VMware will distribute a special cash dividend of between $11.5 billion and $12 billion to all its shareholders, including Dell, which will receive between $9.3 billion and $9.7 billion, in the transaction that is expected to be tax-free.
The spinoff, first proposed in a filing last July, will help Dell lower its long-term debt of $41.62 billion, much of which was taken on during its 2016 acquisition of data management firm EMC. Dell hopes doing so will help it achieve an investment grade rating and simplify its capital structure.
VMware is currently Dell's best-performing unit and has benefited from companies looking to cut costs and move to the cloud, a shift that has been accelerated by the COVID-19 pandemic.
Shares of Dell jumped more than 8.4% in extended trading, while VMWare stock rose 1.5%.
VMware interim Chief Executive Officer Zane Rowe told Reuters in an interview that VMware will use between $2.5 billion and $3 billion of cash from its balance sheet to pay the dividend and fund the rest with debt. Rowe said VMware expects to have an investment-grade credit rating after the transaction.
"The move is long overdue. Great news to Dell shareholders as it unlocks the value that's stuck in the VMWare ownership," said Dan Ives, analyst at Wedbush Securities, adding that the dividend Dell expects to receive is 10% higher than the Street's bull case.
Elliott Management Investment, one of Dell's largest shareholders, said it strongly supports the spinoff in a statement.
The companies said the deal will simplify their capital structures. Both will also enter a commercial arrangement to continue to align sales activities and develop new products jointly. Under the agreement, executives at both companies will have compensation tied to the success of the partnership, Rowe told Reuters.
The spinoff could also allow VMware to strike more partnerships with major cloud computing providers including Amazon and Microsoft, which are also Dell's primary technology competitors.
"This will clearly give us a lot of flexibility strategically to do more partnerships," Rowe said.
VMware, whose software helps companies squeeze more work from data center servers, has been looking for a chief executive officer after previous boss Pat Gelsinger was tapped to lead Intel Corp (INTC.O). Rowe said the company had no updates on the CEO search.
The deal is expected to close in the fourth quarter.
Our Standards: The Thomson Reuters Trust Principles.
Read Next
Read Next
EXCLUSIVE Personal finance startup NerdWallet files for U.S. IPO -sources
10:21 AM PDT
Read Next
Facebook to defend itself against 'damaging' Irish data privacy probe
8:27 AM PDT
Read Next
Largest decentralized finance venture cap firm raises $100 mln for 2nd fund
7:36 AM PDT
Read Next
Court allows Irish regulator to proceed with inquiry into Facebook data flows
8:22 AM PDT

Sign up for our newsletter
Subscribe for our daily curated newsletter to receive the latest exclusive Reuters coverage delivered to your inbox.
Technology
Technology · 10:18 AM PDT
Facebook faces prospect of ‘devastating’ data transfer ban after Irish ruling
Ireland's data regulator can resume a probe that may trigger a ban on Facebook's transatlantic data transfers, the High Court ruled on Friday, raising the prospect of a stoppage that the company warns would have a devastating impact on its business.
Technology
Toshiba unit hacked by DarkSide, conglomerate to undergo strategic review
6:26 AM PDT
Technology
EXCLUSIVE Personal finance startup NerdWallet files for U.S. IPO -sources
10:21 AM PDT
Technology
Analysis: How murky legal rules allow Tesla’s Musk to keep moving markets
6:56 AM PDT
Technology
Largest decentralized finance venture cap firm raises $100 mln for 2nd fund
7:36 AM PDT
Latest
Home
Media
Videos
Pictures
Graphics
Browse
World
Business
Markets
Breakingviews
Technology
Investigations
Lifestyle
About Reuters
About Reuters
Careers
Reuters News Agency
Brand Attribution Guidelines
Reuters Leadership
Reuters Fact Check
Reuters Diversity Report
Stay Informed
Download the App
Newsletters
Information you can trust
Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers.
Follow Us
Thomson Reuters Products
Westlaw
Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology.
Onesource
The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs.
Checkpoint
The industry leader for online information for tax, accounting and finance professionals.
Refinitiv Products
Eikon
Information, analytics and exclusive news on financial markets - delivered in an intuitive desktop and mobile interface.
Refinitiv Data Platform
Access to real-time, reference, and non-real time data in the cloud to power your enterprise.
World-Check
Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks.
Advertise With Us
Advertising Guidelines
Cookies
Terms of Use
Privacy
Corrections
Site Feedback

All quotes delayed a minimum of 15 minutes. See here for a complete list of exchanges and delays.
© 2021 Reuters. All rights reserved