Dell Technologies is reportedly examining options including a spinoff for its $50 billion stake in enterprise software specialist VMware as it seeks to boost the value of its shares.
The report first emerged in The Wall Street Journal (subscription required) and has since been picked up elsewhere. According to CNBC, the news caused the share prices of both companies to rise on Tuesday, with Dell up by as much by 21% and VMware by more than 11%.
Dell currently owns around 81% of VMware, which it gained through its 2016 merger with EMC. The PC maker has also considered buying the remaining parts of VMware that it does not already own.
Bloomberg provides some insights into why Dell might consider spinning off a company that focuses on the hot topic of network virtualization, and which has been doing pretty well of late with double-digit year-on-year growth in the first quarter (ending May 1) of its 2021 fiscal year.
An opinion piece suggested that Dell is not getting full value for either its ownership of VMware or its own computing and data-storage business. It also said a buyout of the rest of VMware, followed by a spinoff of the whole company, "makes the most sense but would take a long time and is easier said than done." The Journal indicates that the talks on a possible spinoff are at a very early stage and may not go anywhere.
Earlier this year, VMware confirmed it had laid off an unspecified number of employees following a series of acquisitions, including Nysana, Pivotal and Carbon Black.
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— Anne Morris, contributing editor, special to Light Reading