Dell Spins Off VMware

It was kind of weird when Dell bought VMware in the first place. It was billed as sort of a move to get Dell into the enterprise space by having sort of an inside track with VMware. If that wasn’t weird enough the mechanics of the merger were even weirder, where Dell basically bought a lot of shares of VMware, but not all of them, allowing VMware to continue trading on the stock market, even though it was functionally a part of Dell… or sometime.

Ironically, just when it seemed like VMware would be a significant part of the future of enterprise computing, it was made superfluous by the rise of cloud providers like Amazon, Google, and Microsoft providing their own virtual hypervisor platforms and management systems. Much of VMware’s market share these days is simply the inertia of companies that haven’t moved on.

Anyway, Dell spun off VMware today by giving the 81% of VMware stock that it owned to Dell shareholders. For each share of Dell stock, shareholders get 0.440626 shares. In lieu of fractional shares, the company will pay out cash, so if you have 100 Dell shares, you’ll get 44 shares of VMware and cash for the remaining 0.06 (approx) shares.

If you already owned VMware stock, this would be a big dilution of your shares. To compensate, there will be a special one-time dividend of $27.40 per share of VMware stock. VMware says that 60.5 percent of this dividend is a “return on capital”. The rest will be taxable for most shareholders.

After all this, Michael Dell will still own about 41% of VMware stock, but as a personal shareholder. Dell the company, will not own any VMware shares.

Like I said, “Weird.”

VMware Stock

Honestly, even though I do a lot of technology writing, I’ve kind of lost track of VMware. Like I said, once upon a time, it was a major player in virtualization. Virtualization is the key to provisioning a bank of server power into smaller servers and computers. If you are building an internal “cloud” then VMware is the premier player in this space. However, the tech world has moved along and a lot of companies use public clouds (AWS, Azure, Google Cloud). I need to look into it, but it may be that VMware already has all of the market share there is to get for its services.

Newly independent VMware Inc will look to pursue deeper deals with cloud computing providers and consider “large scale” acquisitions that could help the company grow, Chief Executive Raghu Raghuram told Reuters.

After Dell spinout, VMware CEO looks to cloud partnerships and M&A (yahoo.com)

I mean, I guess.

VMware stock will trade as VMW.

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