VMware CEO Tries To Calm Partners (And Investors), Says Dell-EMC Won't Change Channel Focus

VMware shares dropped more than 4 percent in Tuesday trading as investors continued to digest the implications of Dell's $67.1 billion bid to acquire VMware parent company EMC.

Shares of VMware, Palo Alto, Calif., fell $2.93 to close at $69.34, then shed an additional $0.15 in after-hours trading. They've now fallen more than 12 percent since the Dell-EMC deal was announced and are down more than 16 percent since the beginning of the year.

VMware CEO Pat Gelsinger, in an email sent to partners Tuesday, tried to calm any fears the channel may have about the deal, which would be the largest in the history of the IT industry if it's approved by government regulators.

[Related: VMware Shares Hammered After Dell-EMC Deal Unveiled, Analyst Warns Of 'Nightmare' Scenario]

"My leadership team will remain in place, and we are as committed as ever to helping you address the most pressing business and IT challenges," Gelsinger said in the email, which was viewed by CRN. He also said VMware's commitment to the channel and investment in partners won't change.

In a conference call held Monday to discuss the Dell-EMC deal, Gelsinger said Dell CEO Michael Dell intends to increase his stake in VMware once the deal is done.

VMware has seen a series of high-profile exits in the past few months, including Chief Technology Officer Ben Fathi and top storage executive Chuck Hollis, among others.

One VMware partner told CRN he thinks it's highly unlikely that the Dell-EMC deal won't result in major changes for the virtualization vendor's channel.

"VMware is telling us it will be business as usual for them and do not expect any changes until the dust settles. It is going to be an interesting week for sure," said one VMware partner, who didn't want to be named.

Although Dell has said VMware will remain a publicly traded vendor, investors may be spooked by the fact that under the proposed deal, EMC shareholders will be getting shares amounting to more than half of VMware's market value through what's known as a tracking stock.

With VMware no longer under EMC's control, shareholders could choose to sell their VMware tracking stock on the open market, which could lead to volatility.

A VMware spokesman told CRN in an email that the vendor intends to continue investing in its partner channel and ecosystem. "We remain positive about the value of this deal to VMware. It has the potential to significantly accelerate our growth and profitability," said the VMware spokesman.

PUBLISHED OCT. 13, 2015