Dell Technologies Shares Up; Exploring Potential VMware Spin-Off
17 July 2020 - 1:47AM
Dow Jones News
By Michael Dabaie
Dell Technologies Inc. shares were up 14% to $60.05 in morning
trading.
The company said Wednesday it is exploring a potential spin-off
of its 81% equity ownership interest in VMware.
"Although this exploration is in an early stage, Dell
Technologies believes a spin-off could benefit both Dell
Technologies and VMware shareholders, team members, customers and
partners by simplifying capital structures and creating additional
long-term enterprise value," Dell said.
Any potential spin-off wouldn't occur prior to September 2021
and would be intended to qualify as tax-free for U.S. federal
income tax purposes.
Additionally, Dell said it continues to evaluate a range of
strategic options concerning its ownership interest in VMware,
including maintaining its current ownership in the company.
Morgan Stanley upgraded Dell from Overweight to Equal-weight and
boosted its price target to $68 from $50.
Morgan Stanley said it expects a spin-off of VMware to be
accompanied by a substantial cash dividend. The analyst note also
said the sale of Pivotal and RSA and now a potential spin-off of
VMware simplifies Dell's ownership structure.
Morgan Stanley said that "while end market growth will remain
challenged due to more applications running in cloud data centers,
the PC market benefits from more remote work and we expect Dell's
new mid-range storage platform, PowerStore, to accelerate share
gains. As a result, we see Dell continuing to grow faster than
peers."
Morgan Stanley said its $68 price target assumes a 50%
probability of a VMware spin-off.
VMware shares were up 2.7% to $143.43.
The Wall Street Journal reported in June that Dell had kicked
off a process to explore the possibility of unloading the stake or
taking other steps that could include buying the rest of the
cloud-software giant, citing people familiar with the matter.
Write to Michael Dabaie at michael.dabaie@wsj.com
(END) Dow Jones Newswires
July 16, 2020 11:32 ET (15:32 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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