Channel programs News
The Top 10 News Stories Of 2020 (So Far)
The impact of the COVID-19 pandemic, a steep economic downturn, the IT industry’s response to the social justice movement, an abandoned corporate takeover attempt, a possible spin-off, new technologies and old technology rivalries. It has been a very tumultuous 2020 – so far.
5. Dell Considers Plan To Spin Off VMware
Dell Technologies disclosed in July that the company is mulling a plan to spin off VMware, the virtualization technology leader in which Dell owns an 81 percent stake. Dell’s acknowledgement confirmed reports about a possible spin off that had been circulating for several weeks.
Dell acquired the stake in VMware in 2016 as part of its blockbuster acquisition of storage company EMC in 2016 for $67 billion. There has been periodic speculation, including in December 2018 when Dell became a public company, that Dell might acquire all of VMware or spin it off entirely. (Dell did buy back the VMware tracking stock that was issued at the time of the EMC acquisition.)
Dell and VMware have built an extensive strategic relationship that includes co-developing the VxRack hyper-converged, rack-based infrastructure system and the VxRail hyper-converged infrastructure appliance. Should a spin off occur the two companies would have to establish formal agreements to replace the current Dell-VMware relationship around research and development, intellectual property, go-to-market and services.
On July 15 Dell, in a filing with the U.S. Securities and Exchange Commission and in a statement, disclosed that it was in the early stages of exploring whether it might spin off its equity stake in VMware. Dell said such a move would benefit shareholders of both companies, as well as employees, customers and partners, “by simplifying capital structures and creating additional long-term enterprise value.”
For Dell, the move would provide it with more cash and improve the company’s credit rating to investment grade, create more financial flexibility, lower debt service costs and likely attract new investors.
The company said a spinoff wouldn’t happen before September 2021. Dell said it’s also evaluating “a range of strategic options concerning its ownership of VMware,” including retaining its ownership stake as it stands.