Dell has finally confirmed long-running speculation that it will sell off its majority stake in VMware.
The tech giant inherited VMware through its gargantuan acquisition of EMC for $67bn in 2015 and rumours emerged last summer that it was mulling over a divestiture of the virtualisation vendor.
The transaction will see Dell offer VMware’s shareholders a special dividend of between $11.5bn and $12bn at the close of the transaction, which is expected in Q4 of 2021. This would result in a payout of over $9bn for Dell, which it intends to use to pay down debt.
“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.
“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 modernise its core infrastructure and PC businesses and embrace new opportunities through an open ecosystem to grow in hybrid and private cloud, edge and telecom.”
Michael Dell will remain as chairman of VMware, and its interim CEO Zane Rowe and its board of directors will also remain in their positions after the transaction completes. The spinout will result in two independent companies.
The pair have also agreed a five-year deal which will see Dell’s sales team sell VMware’s products and the latter work closely with Dell Financial Services.
Zane Rowe, Chief Financial Officer and interim CEO at VMware added: “We will have an enhanced ability to extend our ecosystem across all cloud vendors and on-premises infrastructure vendors and a capital structure that will support growth opportunities.
“Our strategic partnership with Dell Technologies remains a differentiator for us, and, as we execute on our multi-cloud strategy, we continue to provide customers our solutions and services on any public cloud and any infrastructure.”
