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Dell Technologies and VMware formalize their expected split

Dell Technologies and VMware formalize an amicable split

Dell Technologies and VMware formalize an amicable split and the day has come. After months of announcing it informally and warning that sooner or later it was going to happen, Dell Technologies has just announced that it is severing the last ties that bound it to VMware, which becomes a completely independent company. With this decision, both Dell and VMware gain in agility and theoretically also in financial freedom. For the time being, the separation of the two companies will not have a direct impact on customers, although it will probably end up having one in the medium term.

In 2016, Dell owned 81% of the shares of VMware, which became part of the group after the acquisition that same year of EMC for $67 billion. VMware, which as part of this spin-off will buy back its shares, will distribute a dividend of between $11.5 billion and $12 billion to its shareholders, of which about $9.7 billion will go directly into Dell Technologies’ portfolio.

Despite the spin-off, both companies have stated that they expect to increase their collaboration and the synergies between their products, to bring the best digital transformation solutions to enterprises. Among the products and services involving the collaboration of both companies, solutions such as VMware Cloud on Dell EMC, which combines VMware’s high-performance computing, storage and networking software integrated with Dell EMC’s hyper-converged infrastructure (HCI), stand out.

Dell Technologies and VMware formalize an amicable split

But in addition to bringing joint solutions to market, both companies have also said they will develop new edge computing, telecommunications, or 5G solutions. At the same time, they remain committed to continuing to drive VMware revenue through Dell’s distribution channel, in addition to continuing to offer VMware the brand’s financial services.

As stated by Zane Rowe, CFO and interim CEO of VMware, with the separation of the two companies “we will have an enhanced ability to expand our ecosystem across all cloud providers and local infrastructure providers and a capital structure that will support growth opportunities.” He added that its relationship with Dell Technologies “will continue to be a differentiator for us and, as we execute on our multi-cloud strategy, we will continue to provide customers with our solutions and services across any public cloud and any infrastructure.” Put another way, this spinoff is basically and mostly on the financial side since at the operations and customer relationship level there is not going to be a real separation.

Until the separation of the two companies is finalized, probably in the last quarter of 2021, Michael Dell will continue as chairman and CEO of Dell Technologies, as well as chairman of VMware. Rowe, meanwhile, will remain in his position as interim CEO of VMware. Following the official announcement, Dell Technologies shares rose 8%.

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