Dell spins off VMware stake to pay $9.7 Billion to reduce the debt
By MYBRANDBOOK
Dell Technologies Inc said on Wednesday it would spin off its 81 percent stake in cloud VMware, in a move that will help the PC maker reduce its debt and the two companies will continue to operate without major changes for at least five years.
The proposal has come for delivering value to the shareholders, where VMware will distribute a special cash dividend of between $11.5 billion (roughly Rs. 86,450 crores) and $12 billion (roughly Rs. 90,220 crores) to all its shareholders, including Dell, which will receive between $9.3 billion (roughly Rs. 69,920 crores) and $9.7 billion (roughly Rs. 72,930 crores), in the transaction that is expected to be tax-free.
Dell will continue to resell VMware products – a critical arrangement for VMware as 35 per cent of its revenue comes from sales initiated by Dell, though one that Dell said it needs to work on because reselling VMware is currently a break-even effort. Dell hopes doing so will help it achieve an investment grade rating and simplify its capital structure. However, the products including VXrail and VMware Cloud on Dell EMC will remain unchanged.
VMware is currently Dell's best-performing unit and has benefited from companies looking to cut costs and move to the cloud, a shift that has been accelerated by the COVID-19 pandemic. Dell will use the cash to retire some of its own debt and therefore reduce interest payments. VMware will take on debt to fund the dividend, as it only has $4bn cash at hand, and spend the next couple of years paying down debt as soon as possible.
VMware interim Chief Executive Officer Zane Rowe told Reuters in an interview that VMware will use between $2.5 billion (roughly Rs. 18,80 crores) and $3 billion (roughly Rs. 22,550 crores) of cash from its balance sheet to pay the dividend and fund the rest with debt. Rowe said VMware expects to have an investment-grade credit rating after the transaction. The recent changes to the structure of the company’s shares also mean it can be listed in prestigious stock market indices, which tends to attract investors.
With this announcement, shares of Dell jumped more than 8.4 percent in extended trading, while VMWare stock rose 1.5 percent. The deal is expected to close in the fourth quarter this year, but could be called off if it isn't done by early 2022, if either company backs out, or if things go pear-shaped in various ways.
BREAKING NEWS
TECHNO TRENDS
InterGlobe’s Rahul Bhatia and C.P. Gurnani together announce
In a move that is set to transform the AI landscape, Rahul Bhatia, Group M...
Download masked Aadhaar to improve privacy
Download a masked Aadhaar from UIDAI to improve privacy. Select masking w...
Sterlite Technologies' Rs 145 crore claim against BSNL rejecte
An arbitrator has rejected broadband technology company Sterlite Technolog...
ID-REDACT® ensures full compliance with the DPDP Act for Indi
Data Safeguard India Pvt Ltd, a wholly-owned subsidiary of Data Safeguard ...
E-Magazine
TECHNOTAINMENT
Salman Khan trolled for singing with B Praak at Anant Ambani's
To celebrate Mukesh Ambani's youngest son Anant Ambani’s 29th birthday
Disney+ Hotstar wins the Best OTT Platform of the year
Film Critics Guild and Group M Motion Entertainment, in collaboration with
MOVERS & SHAKERS
SISL elevates Ankita Wadhawan as CEO—End User Computing
The IT service provider, SISL in a LinkedIn post announced the elevation
InfoVision appoints Radhika Venkatraman to its Advisory Board
Global digital services company, InfoVision has announced the appointment
OPEN YOUR EYES
INTERVIEWS
Fire-Boltt innovates and introduces newer categories to make i
One of the biggest strengths and focus area of Fire-Boltt is innovation. Wi
Cisco committed to help build trusted, resilient future for or
Cisco is delivering on its promise of the AI-driven Cisco Security Cloud to
HOT PICK
Canon India Introduces 4K Remote PTZ Camera Controller & 4K In
Canon India, a leading company in digital imaging solutions, further solidi
Dell Technologies launches the new consumer and gaming portfol
Dell Technologies has unveiled its newest line of AI-enabled consumer PCs
MAKE IN INDIA BRANDS
QUICK HEAL TECHNOLOGIES PVT. Ltd.
OPTIEMUS INFRACOM
MICROMAX INFORMATICS LTD.
CENTRE FOR DEVELOPMENT OF TELEMATICS
EMINENT CIO'S OF INDIA
ICONS OF INDIA
Technology Icons Of India 2023: Josh Foulger
Josh is the Country Head of India and MD of Bharat FIH Ltd (A Foxconn ...
Technology Icons Of India 2023: Nandan Nilekani
Nandan Nilekani is the Co-Founder and Chairman of the Board, Infosys T...
Technology Icons Of India 2023: Dilip Asbe
Dilip Asbe is the MD & CEO of National Payments Corporation of India (...
PARTNER SPEAKERS
PSU
GSTN aims to integrate indirect tax ecosystem on a shared IT infrastructure
Goods and Services Tax Network (GSTN) has built Indirect Taxation plat...
STPI encouraging software exports from India
Software Technology Parks of India (STPI) is an S&T organization under...
PGCIL transforming India with its wide power transmission network
Engaged in power transmission, POWERGRID or PGCIL is a stated owned In...
VIDEOS
Top 25 Brands
Value-Added Distribution
REDINGTON INDIA LIMITED
Redington (India) Limited operates in the IT product distribution busi...
M. TECH SOLUTIONS (I) PVT. LTD.
M.Tech is a leading cyber security and network performance solutions ...
NETPOLEON SOLUTIONS
Netpoleon Group is a Value-Added Distributor (VAD) of Network Security...
ITFORUM 2024
WIITF 2024
CMO of the Year
WOMEN LEADERSHIP
EMINENT CIO's OF INDIA
TRENDS IN TECHNOLOGY
MORE VIDEOS
ADVERTISEMENTS
TECHNOLOGY DISRUPTION
UNICORNS REVOLUTIONISING
