VMware CEO Pat Gelsinger on Tuesday told Wall Street analysts that he sees "significant opportunities for ongoing revenue synergies" from the blockbuster Dell-EMC merger, which has taken a devastating toll on VMware shares.
As if to prove the point, VMware, a subsidiary of EMC, announced that its board of directors has authorized a repurchase of up to $1.2 billion of Class A shares through Dec. 31, 2016.
"This provides an opportunity for us to return cash to shareholders given the confidence we see in the business," said Gelsinger.
The stock repurchase, combined with the report of better-than-expected results for its first fiscal quarter, ended March 31, sent VMware shares up 9 percent, or $4.52, to $54.98 in after-hours trading.
The planned stock repurchase came after VMware reported earnings of 86 cents per diluted share on sales of $1.59 billion for the quarter. The Wall Street consensus was earnings of 84 cents per diluted share on revenue of $1.58 billion.
The VMware after-hours share gains are a respite from the beating VMware shares have taken since Dell announced that it planned to acquire EMC in a $67 billion blockbuster deal -- the largest in IT history -- last fall.
VMware shares had plummeted from $78.65 before the deal was announced to $51.46 on Tuesday.
In a Securities and Exchange Commission filing in February, Dell warned that a whopping $14 billion drop in the market capitalization of VMware is going to negatively affect the final price of the blockbuster acquisition of EMC. At that time, Dell said the total value of the blockbuster acquisition has dropped by nearly $8 billion, from $67 billion as originally proposed to $59.5 billion.
Gelsinger, for his part, said he sees gains coming from both the existing relationship with Dell and future synergies once the deal is finalized.
In fact, Gelsinger said, VMware is already seeing "strong momentum" from new Dell VMware-based channel offerings. Dell announced earlier this month that it will resell VxRail, which includes VMware software and VMware VSAN.