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Dell Confirms Exploring VMware Spin-Off


After weeks of speculation, Dell Technologies has confirmed that it is exploring a potential spin-off of its 81% equity ownership interest in VMware.

“Although this exploration is in an early stage, Dell Technologies believes a spin-off could benefit both Dell Technologies and VMware shareholders, team members, customers and partners by simplifying capital structures and creating additional long-term enterprise value,” said Dell in a statement.

However, any potential spin-off would not occur prior to September 2021 and would be intended to qualify as tax-free for U.S. federal income tax purposes.

In addition, Dell Technologies has also admitted that it is continuing to evaluate a number of strategic options regarding its participation in VMware, including maintaining its current ownership in the company.

As part of its exploration of a potential spin-off, Dell Technologies expects it would seek to formalize mutually beneficial commercial arrangements similar to those currently in place.

This includes go-to-market, services, research and development, and intellectual property agreements between Dell Technologies and VMware, providing ongoing strategic benefits and continued support for customers of both companies following any spin-off.

If it determines to pursue a spin-off, Dell Technologies also expects to negotiate and agree to certain related terms and conditions with a special committee of the Board of Directors of VMware and the Board of Directors of VMware.

In that event Dell Technologies would look to negotiate the payment of a special cash dividend by VMware that would be paid on a pro rata basis to all VMware shareholders.

“The strategic relationship between Dell Technologies and VMware has never been stronger,” said Michael Dell, chairman and chief executive officer, Dell Technologies. “For more than 20 years, we’ve innovated for our customers and created substantial growth and value for both companies and our teams.

“Regardless of the options we are exploring to create additional value, we are accelerating our strategy – which remains unchanged. We are focused on winning in the consolidating markets where we operate and innovating across the Dell Technologies portfolio to create integrated solutions that turn data into insights and action.”

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