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VMware and Dell break up, but the shareholders are alright

The breakup is now official – VMware and Dell Technologies have parted ways. Dell began its process of unloading its 81% stake in VMware in June 2020 and finalized the spinoff this week.

The spinoff includes a $11.5 billion special cash dividend to VMware shareholders, which equates to a $27.40 per share dividend payment to all VMware stockholders. VMware says the separation from Dell will provide it with the ability to better execute its multi-cloud strategy, deliver a simplified capital structure and governance model, and gain operational and financial flexibility. For Dell, this could be one big step in a positive direction toward addressing nearly $49 billion in debt.

"As a standalone company, we will continue to bring our multi-cloud strategy to life by providing our customers the power to accelerate their business and control their destiny in this new era," said Raghu Raghuram, CEO of VMware, in a statement.

Taking stock

VMware's stock is down about 4% – the stock price has dropped from $152 on Monday to about $130 a share today; Dell Technologies' stock is up about 0.6% shifted from nearly $56 a share to $55 today.

VMware was acquired by EMC in 1998, which later merged with Dell in 2016; in 2007 VMware's IPO put 15% ownership on the market, according to the Wall Street Journal.

Despite parting ways financially, Dell and VMware plan to continue partnering in the future on product development for mutual customers.

In a recent blog post, Raghuram added that this newfound freedom will give VMware the "flexibility to partner even more deeply with all cloud and on-premises infrastructure companies to create a better foundation that drives results for our customers. And the increased flexibility we will have to use equity to complete future acquisitions will help us remain competitive."

— Kelsey Kusterer Ziser, Senior Editor, Light Reading

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