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Dell Considering Sale Of VMware Stake: Report

'If it's fiscally related, this is probably the right time to do it,' one solution provider CEO told CRN.

Dell Technologies is considering spinning off its majority stake in VMware, potentially in an attempt to increase its market value, according to a Wall Street Journal report.

The report comes as technologies from data center giant Dell and virtualization leader VMware have been more tightly integrated than ever, including in solutions such as the VxRail hyperconverged infrastructure system and the Dell Technologies Cloud suite.

[Related: 10 Biggest Dell Technologies News Stories Of 2020 (So Far)]

Dell's 81-percent stake in VMware has been valued at $50 billion, but Dell's own market capitalization stood at $36 billion prior to the report Tuesday--suggesting that the market is “assigning little or no value” to Dell’s data center and PC businesses, the Journal reported.

The report described Dell’s evaluation process as being in the early stages, with working groups formed only recently to examine the options around the VMware stake. The Journal indicated that Dell still may not pursue a spinoff at all--and also added that any decision is "unlikely" before 2021.

VMware and Dell Technologies declined to comment on Tuesday, citing policies of not commenting on speculation.

Dell Technologies’ stock price soared 18 percent, to $57.80 a share, in after-market trading Tuesday. VMware’s stock price jumped 9 percent to $162.80 a share.

The possibility that Dell is considering a spinoff of its stake in VMware would not be a major shock, said Bob Venero, CEO of Holbrook, N.Y.-based Future Tech Enterprise, No. 96 on CRN's Solution Provider 500 for 2020.

"When you look at VMware and its position in the market--as the de facto virtualization platform out there--it doesn't surprise me that it kind of overshadows some of the other technological advances that Dell has put together, from acquisition and homegrown over the last decade or so. VMware just has such a crazy market share compared to everyone else out there," said Venero, who noted that his company's VMware business is up 22 percent for 2020 so far compared the same period a year ago.

Additionally, "if there was ever a time to sell, it's probably now. VMware is up pretty well, and the market is in much better shape than it was not too long ago," Venero said. "So if it's fiscally related, this is probably the right time to do it. And when [Dell Technologies CEO] Michael [Dell] does something, there's generally a good reason for it--he doesn't seem to miss a step when it comes to making strategic chess moves out there in the market."

In a recent interview with CRN, Michael Dell pointed to major traction for the joint technology innovation between VMware and Dell Technologies.

"If you look at what we did with VxRail and VxRack, just as an interesting example, those two combined have generated more than $4.5 billion in orders since inception. We’ve actually been exceeding the ambitious targets that we set for ourselves there. Those solutions continue to grow and get better," Dell said. "Now we have those with VMware Cloud Foundation, and we continue to enhance the combined solutions with the Dell Technologies Cloud, with Unified Workspace, with our SmartFabric Director—the innovation engine is on high."

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