Dell Technologies Inc. (NYSE:DELL) is exploring a number of options that include a spin-off of its stakes in VMware, Inc. (NYSE:VMW). Immediate reports indicate that the company is contemplating unloading or buying VMware outright. Currently, the technology giant is majority shareholder with an 81% stake in VMware.
News of the proposed divestiture sent Dell and VMware shares exploding, rallying by more than 15% and 8%, respectively. Dell stock has been on an impressive run ever since it bottomed out following the March 23 COVID0-19 triggered market crashes. The stock has rallied by more than 20% in the process as it closes in on 2020 highs.
VMware stock has also been on an impressive run, recouping all the losses that acme into being after the March 23 market crash. The stock is up by more than 50% since March and showing no signs of slowing down.
Dell is reportedly looking to offload or buy VMware outright as part of a larger plan to bolster its market value. The chatter should continue to drive the two stock’s price action, given the potential impact of any outcome.
Dell- VMware Integration
According to media reports, Dell is currently in the early stages as it continues to evaluate options on how to go about its stakes in VMWARE. Its stakes in the enterprise giant are valued at about $50 billion more than its market cap that oscillates around $36 billion.
The two companies have become highly intertwined in recent years. The two have joined forces leading to the development of solutions such as the VxRail hyperconverged infrastructure system and the Dell Technologies cloud suite.
VMware, on the other hand, has grown to become a de facto virtualization giant seen as one of the reasons why Dell would move to generate a premium from its stake in the company. Similarly, the technology giant could use the opportunity to buy the company outright to expand and strengthen its prospects in the cloud computing business.