Dell to spin out VMware to raise over $9 billion for the enterprise

Dell to spin out VMware to raise over $9 billion for the enterprise

American multinational computer technology company, Dell, has reportedly announced that it is spinning out VMware, which was acquired by the company as part of the massive $58 billion EMC acquisition in 2015.

Under the deal, Dell intends to offer a special dividend of between $11.5 and $12 billion to the shareholders of VMware. Given that Dell owns almost 81 per cent of those shares, this would bring nearly $9.3 to $9.7 billion into Dell’s coffers upon the closure of the transaction later this year.

In a presentation to investors, the organizations have showed that the plan to work in collaboration is more than lip service. The companies have put a five-year-long deal commercial agreement in place, with plans for revisiting that deal every year thereafter. Additionally, there is also a plan for selling VMware products via the sales team at Dell and for VMware to continue working with Dell Financial Services.

Finally, a formalized governance process has also been in place. The process is associated with the achievement of commercial objectives under the agreement. Therefore, it is certain that these organizations will continue to work closely together for a period of at least another five years.

According to Michael Dell, the CEO of Dell, by spinning off VMware, the company expects to drive additional opportunities of growth for Dell Technologies and VMware and unlock considerable value for shareholders. Dell further stated that both organizations will remain significant partners, with a differentiated advantage in how solutions are brought to customers.

It is to be noted that, after the announcement, shares of Dell have witnessed an upsurge of more than 8 per cent. The company intends on utilizing parts of its proceeds for deleveraging. Dell has written in a release that it will utilize net proceeds for paying down debt and believes that this will place the company in a better position for Investment Grade ratings.

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Sunil Jha

Sunil Jha has been a part of the content industry for close to two years. Having previously worked as a voice over artist and sportswriter, he now focuses on writing articles for, across a slew of topics, ranging from technology to trade and finance. With a business-oriented educational background, Sunil brings forth the expertise of deep-dive research and a strategic approach in his write ups.