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Deutsche Bank Initiates Dell Coverage With 'Buy' Rating And $114 Price Target

The global financial firm's research department sees Dell's tighter link with VMware as key to a healthy upside.

Global banking and financial services company Deutsche Bank initiated its coverage of Dell Technologies' tracking stock with a 'buy' rating and a price target of $114 a share on Wednesday. The bank's analysts say Dell is giving VMware more exposure.

Shares for the Round Rock, Texas-based company were up $1.55 (2.13%) to 74.29 in regular trading on Wednesday. Dell's debt and business fundamentals are "challenged but not as dire as most assume," wrote Deutsche Bank analyst Karl Keirstead.

Deutsche Bank's analysts see upside in Dell giving more exposure to VMware after it bought a majority stake in the virtualization leader through its blockbuster $67 billion acquisition of EMC.

The higher price target and buy rating comes as Dell Technologies is exploring two strategic options that include merging with VMware.

[Related: Dell EMC Stepping Up Global Dell EMC-VMware Sales Offensive]

Dell has been driving tighter alignment with VMware to make it easier and more profitable for solution providers to sell combined Dell EMC-VMware offerings. Earlier this month Dell Technologies CEO Michael Dell confirmed that the $80 billion industry behemoth is currently evaluating an initial public offering or a "business combination" with VMware.

"As part of our ongoing multi-year strategic planning, Dell Technologies is evaluating a number of potential business opportunities. As you can see from our results, we do this from a position of strength, with a desire to grow Dell Technologies and its businesses even faster and thrive in the very dynamic IT marketplace," said Dell in an 8-K filing with the Securities and Exchange Commission.

Deutsche's report comes one day before VMware reports its fiscal fourth quarter earnings on March 1, followed by Dell's on March 8.

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