Spinning Off VMware Is A Loss For Dell
One of the main reasons why Dell is spinning off its 81 percent stake in VMware is so Dell Technologies can achieve an investment-grade credit rating, which Dell hasn’t held since Michael Dell took the company private in 2013.
Dell hopes to achieve an investment-grade credit rating by selling-off VMware which would boost Dell’s R&D and M&A abilities, capital structure as well as likely attract new investors.
“Dell itself is saddled with debt. That certainly holds it back from what it can do from an M&A and R&D perspective. So you could argue that customers are suffering a little bit in that they can’t drive the same type of innovation they could without it,” said Kerravala.
As part of the Dell-VMware spin-off deal, VMware will pay a special cash dividend of between $11.5 billion to $12 billion to the company’s shareholders, which will include around $9.5 billion for Dell Technologies who will use the funds to help paid off its $33 billion in core debt.