Former tech giant, Dell, is set to make a comeback to the industry. Dell Technologies Inc. will buy out its tracking stock to obtain stronger control over VMware, Inc, giving Dell an easier avenue to obtain the rest of the software in the future. The current value of the stock is about $17 billion with the total market value of VMWare at around $60 billion. The stock has almost doubled since it was issued, with the current closing value around $84.58. Currently, over 80% of VMWare is controlled by Dell stockholders and Dell’s DHI shareholders, Michael Dell and Silver Lake.
Dell used to be a top personal computer brand. They have since expanded further into the tech atmosphere, with products including servers, storage hardware, and networking gear; with the EMC acquisition last year in 2016 for $67 billion, Dell now also has software tools being developed, helping them brand themselves further as a software development company.
The current business venture comes five years after Dell dropped from the stock markets. When Michael Dell made Dell private in 2013, $4 billion of his own Dell shares and $750 million in cash were used to complete the $25 billion deal. In 2015, a $67 billion cash and stock merger with EMC was completed. VMWare had over $11 billion in cash at the end of 2017. It had generated $8.1 billion on sales and $3.3 billion in cash flow in one year. Dell has offered to pay $21.7 billion for the shares.
If this is the case, Michael Dell will own 54% of Dell Technologies. This implies that Dell now has $33 billion or so in Dell Shares. VMWare’s New York Stock Exchange (NYSE) value is marketed at $65.8 billion. He will lay claim to around 40% of VMWare, which leads his stake at somewhere around $30 billion. He was ranked at #39 on the 2018 Forbes Billionaires List, with a net work of $22.7 billion. After this merger, his rank and net worth will likely climb.
The purchase was approved by the boards of both Dell and VMWare. This not only simplifies the current confusing structure of Dell but allows Dell to become involved in public stocks again.
“Like our customers, we had to transform for a new digital era, the world of business and technology is merging in a fourth industrial revolution enabled by a perfect storm of technology tipping points,” Dell said to investors and analysis in a conference call, “It’s computing and the Internet of Things, ubiquitous computing through broadband and 5G, along with AI, machine learning have come together to transform the way we use data.”
“In 2012, people were saying the PC was dead. It wasn’t. Three years ago, people were saying that everything’s going to the public cloud. Turns out that was completely wrong, too. I believe we’ve accomplished what we set out to do in evolving the business. But the work of evolving a company is never done,” Mr. Dell said in an interview.