Dell Board Still Weighing Options, But Not Considering a Sale

• February 02 2018
• Alex Barinka

Dell Technologies Inc. said it’s still weighing options though it won’t consider a sale to a third party.

Dell Technologies Inc. said it’s still weighing options though it won’t consider a sale to a third party.

Dell’s management has been weighing options for bringing the company back to public markets, either through an initial public offering or a buyout by publicly traded VMware, people familiar with the matter have said. Billionaire Michael Dell controls VMware as well as owning his namesake company.

In a filing Friday, Dell said it is evaluating opportunities including: business as usual, continuing with the existing ownership structure; an initial public offering; or a business combination with VMware. They don’t include a sale to a third party.

“Nothing has been decided and alternatives are just being considered at this stage,” Dell said in a separate filing.

VMware Chief Executive Officer Pat Gelsinger said in a statement that the company is “not in a position to speculate on the outcome of Dell’s evaluation,” of business opportunities.

Joining the pieces of Michael Dell’s empire would simplify the ownership structure and make it easier to manage Dell’s corporate debt with the help of VMware’s balance sheet and cash generation.

The current structure is tangled. Round Rock, Texas-based Dell Technologies, includes assets he acquired for $67 billion with his 2016 acquisition of EMC Corp., which owned a controlling stake in VMware. The rest of VMware’s stock is publicly traded, as is a tracking stock, under the symbol DVMT, that was created to mirror the value of Dell’s stake in the Palo Alto, California-based company.

If Dell pursues a combination with VMware, its stock would be used to help acquire the private company, people familiar with the matter have said. The merged company would also subsume the tracking stock, they said.

Dell’s 2016 acquisition of EMC almost tripled the company’s debt at the time. Before it went private in 2013, Dell had less than $7 billion of debt, according to data compiled by Bloomberg. As of Nov. 3, the company had about $48.5 billion of bonds and loans.

Uniting the two companies would also expand what they can do for clients. Dell sells server computers and storage devices that help companies run corporate applications and store data. VMware is the leading seller of virtualization software, which is used to help companies cut costs by combining applications and tasks on a single server device.