Dell Stock Soars 8 Percent After Dell-VMware Spin-off Confirmed

“I don’t see any negative impact from this at all to the user base, partner community or on the technology side,” says Presidio CEO Bob Cagnazzi, regarding Dell Technologies’ spin-off of VMware.

Dell Technologies’ stock today is up 8 percent after the company confirmed the spin-off its 81 percent stake in VMware set for later this year as well as reports that Dell is looking to sell its cloud platform company Boomi.

“Dell is continuing to invest in all the right areas for where the market is going and Michael Dell has done that forever,” said Bob Cagnazzi, CEO of Presidio, one of the country’s top solution providers and Dell partners. “VMware, certainly with [former CEO] Pat Gelsinger and now post Pat, has positioned itself really, really well for the hybrid cloud world – I don’t see that changing. … I don’t see any negative impact from this at all to the user base, partner community or on the technology side.”

Dell stock is currently trading at $100.40 per share, up 8 percent. Dell’s stock has climbed nearly 150 percent in one year compared to $40.45 per share on April 15, 2020. VMware’s stock is currently trading $160.16 per share, up 3 percent today.

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After nearly of year from when initial reports first emerged that Dell was looking to spin off its majority stake in VMware, the company on Wednesday confirmed the transaction will take place in late 2021. The move will create two standalone companies but will preserve the close go-to-market and technology development partnership Dell and VMware have had for years. The two companies will cement this partnership by entering into a commercial agreement to preserve its differentiated approached to co-development of solutions and alignment on sales and marketing.

Dell Technologies CEO Michael Dell will still be chairman of the board at VMware until the transaction is complete. The deal is expected to close during the fourth quarter of calendar year 2021, while either Dell or VMware may terminate the agreement if it is not completed on or before Jan. 28, 2022, according to a Dell filing with the U.S. Securities and Exchange Communication.

“By spinning off VMware, we expect to drive additional growth opportunities for Dell Technologies as well as VMware, and unlock significant value for stakeholders,“ said Michael Dell, chairman and CEO of Dell Technologies in a statement. “Both companies will remain important partners, providing Dell Technologies with a differentiated advantage in how we bring solutions to customers. At the same time, Dell Technologies will continue to modernize its core infrastructure and PC businesses and embrace new opportunities through an open ecosystem to grow in hybrid and private cloud, edge and telecom.”

Some key details in Dell’s spin-off of VMware is that VMware will distribute a special cash dividend of between $11.5 billion to $12 billion to all VMware shareholders, which includes Dell Technologies who owns 81 percent of the shares. Dell Technologies would receive approximately $9.5 billion which the company intends to use to pay down debt to better position Dell for investment grade ratings.

Presidio’s Cagnazzi, who has over 30 years of top executive experience in IT industry, said there are only positives he sees that will come from Dell’s spin-off of VMware.

“Perhaps focus of both organizations may change to get a little bit sharper. I don’t think it changes so much on the VMware side, but perhaps on the management side with Dell,” said Cagnazzi. “There’s probably just more focus from each organization on where they’re going, and the fact that the strategic partnerships still remains strong -- you don’t lose anything there either.”

In other recent Dell news, Bloomberg reported this week that Dell is exploring the sale of its cloud business Boomi for which could be valued at upwards of $3 billion. Dell sold its cybersecurity business RSA for just over $2 billion to private equity firm STG Partners last year. In December 2019, Dell sold its cloud-native Kubernetes and containers company Pivotal Software to VMware for $2.7 billion.