Technology

Dell spins off $64bn VMware as it battles debt hangover

IPO is a personal success for Michael Dell to reinvent an out-of-favour PC maker

PC pioneer Michael Dell is set to cap his climb back to the top of the computing world with one of the largest corporate spin-offs. Photograph: Drew Angerer/Getty Images

Richard Waters
Mon Nov 1 2021 - 18:16

PC pioneer Michael Dell is set to cap his climb back to the top of the computing world with one of the largest corporate spin-offs.

Dell Technologies is shedding its 81 per cent stake in publicly traded VMware, creating an independent software company with a stock market value of nearly $64 billion (€55.2 billion). Dell's remaining hardware operations have an implied value of $33 billion, based on its latest share price.

The transaction, first disclosed in April, completes an eight-year saga in which the Texan entrepreneur turned his $3.8 billionn interest in an out-of-favour PC maker into a personal stake in a broader data centre hardware and software empire worth $40 billion.

Beginning with the buyout of his PC company, Dell went on to devour server and storage company EMC for $67 billion, before taking the group public again in 2018. Along the way, he fought heated battles with dissident shareholders over claims that he bought Dell on the cheap and used complex financial engineering in the EMC deal to short-change investors.

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Silver Lake, the Silicon Valley private equity group that helped to mastermind the dealmaking, will be left with stakes in Dell and VMware worth $11 billion.

Dell has been weighed down by debt, after borrowing about $70 billion to finance its dealmaking. As part of the spin-off, VMware is paying a special dividend to shareholders of about $12 billion, helping Dell lighten a remaining net debt load that stood at $32 billion at the end of July.

Compared with Michael Dell’s original business, Dell Technologies now sells a wider range of gear for corporate data centres, though roughly 60 per cent of its revenue still comes from PCs. The company was buoyed by the work-from-home boom in PC sales, and is now pinning its hopes on the new market for “edge computing”, as some of the computing power in centralised cloud data centres moves to smaller, local facilities closer to users. – Copyright The Financial Times Limited 2021

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