Dell Technologies is considering spinning off its US$50 billion stake in VMware, according to a report in the Wall Street Journal (WSJ).
The vendor is also exploring other steps that could include buying the rest of the cloud computing software maker, the Journal reported, citing people familiar with the matter. Dell, which is the controlling stakeholder of VMware, did not immediately respond to a Reuters request for comment.
According to the WSJ report, Dell’s evaluation process was in the early stages and involved groups to examine options with its VMware stake. However, any decisions were said to be "unlikely" to occur before 2021.
Dell has an 81 per cent stake in VMware, which increased in 2018 as part of an effort to buy back shares at US$120 per share and return Dell to the stock market. Rumours were rife during that time when it was revealed that Dell was exploring a range of options as part of a review process.
Currently Dell's stake is valued at roughly US$50 billion, while Dell's own market capitalisation stands at US$36 billion, according to WSJ.
On May 29, Dell revealed it had beaten analysts' estimates for quarterly revenue, boosted by demand for its workstations from companies moving more employees to work from home due to the coronavirus outbreak.
Revenue from the client solutions group, which accounts for half of its revenue and includes desktop PCs, notebooks and tablets, rose 2 per cent to US$11.1 billion in its fiscal first quarter. Commercial notebooks reported double-digit unit and revenue growth, while mobile workstations posted high-single-digit revenue growth, the company said.
"In Q1, we saw orders with banking and financial services, government, healthcare and life sciences customers up 15 per cent to 20 per cent," chief operating officer Jeff Clarke said in a statement.
But higher spending by companies towards enabling remote work, as well as weak demand in China, weighed on Dell's data centre business. Meanwhile, sales from VMware jumped 12 per cent to US$2.76 billion.
Recently the two companies announced a tighter integration between VMware Cloud on Dell EMC within its version 2 release which offers improved support for high-density and high-performance data centre applications.
VMware Cloud on Dell EMC consists of VMware’s high-performance compute, storage and networking software, powered by VMware vSphere, vSAN and NSX, tightly integrated with Dell EMC VxRail hyperconverged infrastructure (HCI) hardware and delivered as a service. These solutions are all managed by VMware.
In February, Dell revealed the sale of its cyber security unit, RSA for US$2.08 billion to a consortium headed by Symphony Technology Group, Ontario Teachers Pension Plan Board and AlpInvest Partners.
The two companies expect the deal to close within the next six to nine months, claiming until then things would remain business as usual. In a blog, Dell Technologies vice chairman products and operations, Jeff Clarke said it was the right long term strategy for both companies.
“In determining the best long-term future for RSA, we sought a partner that was enthusiastic about RSA’s mission, committed to its customer and partner base, and interested in maximising the power of RSA’s talent, experience, and tremendous growth potential. We believe Symphony Technology Group will be the right custodian to achieve these goals,” he said.
(With Reuters; Additional reporting by Uday Sampath in Bengaluru; Editing by Maju Samuel)