Dell announced that it will spin-off VMWare but will continue to partner with and co-engineer solutions with the soon-to-be separate company.
“By spinning off VMware, we expect to drive additional growth opportunities for Dell Technologies as well as VMware, and unlock significant value for stakeholders,” Dell chairman and CEO Michael Dell said. “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 modernize its core infrastructure and PC businesses and embrace new opportunities through an open ecosystem to grow in hybrid and private cloud, edge, and telecom.”
VMWare became part of Dell five years ago when Dell acquired VMWare’s parent company, EMC, for $67 billion. And though VMWare has been Dell’s best-performing business unit since then, the EMC acquisition has saddled Dell with debt. So as part of the spinoff, Dell plans to receive a payout of up to $9.7 billion, while its shareholders will receive up to $12 billion in special cash dividends. Dell says it will use the net proceeds from the sale to pay down its debt.
Dell expects the transaction to close by the end of 2021. Michael Dell will remain chairman and CEO of Dell and chairman of the VMware board. Zane Rowe will remain interim CEO of VMware, and the VMware board of directors will remain unchanged.