Dell could be about to go public again

Jul 03, 2018, 13:05
Dell could be about to go public again

A logo of Dell Technologies is seen at the Mobile World Congress in Barcelona, Spain February 28, 2018.

When Dell Inc. closed the biggest technology merger in history almost two years ago, the company's namesake founder said the new entity would enjoy its freedom away from the glare of Wall Street and its obsession with quarterly earnings.

A tracking stock is a type of common stock that "tracks" or depends on the financial performance of a specific business unit or operating division of a company rather than the operations of a company as a whole. Holders of the Class V stock can also elect to take a $109/per share cash consideration, a 29% premium to the Class V share closing price prior to announcement. The stock was up 13.5 percent at $96 in premarket trading, while VMware shares rose 14.3 percent to $168.

As Chief Executive Officer, Dell has considered a variety of options to streamline his multicompany tech empire and help the business manage the debt, which stood at $52.7 billion in the latest fiscal first quarter, including its subsidiaries, even after paying down billions.

As part of the deal, VMware's board of directors has approved a one-time special dividend to all VMware shareholders worth US$11 billion.

Five years ago, Michael Dell took his pioneering PC and server company private, citing a desire to avoid the short-term thinking that can consume public companies.

The transaction was likely "initially driven by a desire to find some liquidity for the major shareholders" by unlocking some of the cash VMware had been sitting on, said Shannon Cross, analyst at Cross Research.

"Unprecedented data growth is fueling the digital era of IT, and we are uniquely positioned with our portfolio of technologies and services to enable the digital, IT, security and workforce transformations of our customers".

His strategy is in sharp contrast to that of rival HP Inc, which separated in 2016 from Hewlett Packard Enterprise Co, based on the reasoning that having two technology companies focusing separately on hardware and services would make them more nimble. Its total debt has also gone down by $4.6 billion since the EMC deal.

The Wall Street Journal had reported earlier that Dell planned to buy the DVMT shares and could announce those plans as soon as Monday.

The decision keeps VMware as an independent company.

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