Dell Technologies is investigating the possibility of spinning off its share in VMware, according to the Wall Street Journal. Another scenario is that the company purchases all remaining shares.
Dell Technologies is clearly working on a new strategy concerning VMware. With 81 percent, Dell Technologies is already a major shareholder in the virtualisation giant. Dell Technologies’ shares in VMware currently have an estimated value of 50 billion dollars.
According to the newspaper, it is still unknown precisely what scenario Dell Technologies has in mind, either to sell the shares in VMware or to purchase them all. A spin-off is seen as the most plausible scenario. According to the newspaper, by buying or selling the shares in VMware, the company would like to take advantage of the value of these shares or possibly clear the debt of 48 billion for the 2016 purchase of the storage vendor EMC.
Increasing the cash of the company would be very interesting for investors. Nevertheless, experts expect that things are unlikely to progress at a rapid pace. Dell Technologies would have to pay a lot of taxes to divest the VMware shares before September 2021. According to U.S. regulations, companies for a spin-off must have operated as one entity for at least five years to qualify for tax-free treatment.
Shares have gone up
In any case, both Dell Technologies and VMware have not been adversely affected by the aforementioned rumours. Dell’s share rose by 18 percent, and VMware’s share by almost 10 percent. Both companies recently showed good figures, partly because they benefited from the added demand for cloud services due to the current pandemic.
Earlier this year, Dell Technologies sold RSA for more than 2 billion dollars.