Business Essentials for Professionals


Dell Considering IPO Or Merger With VMWare, Said The Company

Dell Considering IPO Or Merger With VMWare, Said The Company
A public offering is being considered by computer maker Dell Technologies Inc where it plans to either offer common stock by itself or offer its stocks along with the stocks of business software maker VMware Inc which is the publicly held subsidiary of the company.
Dell has bene under pressure ever since it acquired data storage provider EMC Corp for $67 billion in 2016 but the deal did not deliver the financial gains that the cpany had hoped for. Hence, this largest privately held technology company in the world has come under some pressure in recent years.
Dell would be able to reduce its $52.5 billion debt pile with the $11.6 billion cash of VMWare by the former combining with the later. And a cap on the deduction of interest expense as imposed in the U.S. since last month has made it harder for Dell to service that huge debt.
Combining with VMWare would enable Dell to become a publicly listed company and that would present an opportunity to investor Silver Lake to slowly sell off its 18 percent stake in Dell. Using a $24.9 billion leveraged buyout, Dell was helped to become private by Silver Lake in 2013.
It is not until September of this year that Dell would be able to buy out the stake in VMware which the company does not already own because of a lockup provision. And if there is any form of merger between the companies before that it would be treated as a reverse merger where Dell would be considered too have been acquired by VMware.
“We view a reverse merger of Dell by its majority-owned subsidiary, VMware, as potentially the most beneficial alternative for Dell and Silver Lake,” Wells Fargo Securities LLC analysts wrote in a research note.
Strategy co-ordination between Dell and VMware would be possible by the combination of the two as they would be placed under the same management. Consequently, one suite of products can be used to offer Dell’s hardware and VMWare’s software.
“As part of our ongoing multi-year strategic planning, Dell Technologies is evaluating a number of potential business opportunities,” founder Michael Dell said in a blog post. “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.”
“The board of directors follows sound corporate governance practices, and will continue to do so in connection with any potential transaction involving our controlling stockholders,” VMware’s lead director Paul Sagan said in a company statement.
Rivals like Inc’s AWS and Microsoft Corp’s Azure with their cloud-based storage business has pressurized the storage business of Dell. The company is now striving to restructure its storage business following the exit last fall of David Goulden, Dell’s infrastructure chief and former EMC executive.
Dell was founded with a savings of just $1,000 by Michael Dell in 1984 as a University pre-med freshman which later ruled the personal computer market. But the PC market has been pressurized by the fast-growing popularity of smart phones and tablets. According to International Data Corporation, the PC market shrank by 0.2 per cent in 2017.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc