Dell Technologies spinning off ownership stake in VMWare

Dell Technologies said Wednesday that it is spinning off its ownership stake in VMware, a Californiabased cloud-software company.

The deal is expected to close in the fourth quarter of calendar 2021 and result in two standalone companies.

Dell Technologies said the companies will continue to work together through a commercial agreement and continue co-engineering technology.

Dell Technologies is one of the world’s largest tech companies and one of the largest private employers in Central Texas.

Dell Technologies owns about 81 percent of VMware’s common stock, which it gained through its acquisition of EMC Corp in 2016. VMware makes technology used to improve data center performance and cloud infrastructure.

Michael Dell, chairman and chief executive officer of Dell Technologies, said the spinoff is expected to bring growth opportunities for both companies and significant value to shareholders.

“Both companies will remain important partners, providing Dell Technologies with a differentiated advantage in how we bring solutions to customers,” Dell said in a written statement. “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.”

Dell Technologies confirmed in July that it was exploring a potential spinoff of its ownership stake in VMware.

Dell Technologies said the spinoff means it will be able to strengthen its market position and expand in growth areas including hybrid cloud, edge, 5G, telecom and data management.

Under the terms of the deal, VMware will distribute a special cash dividend to shareholders totaling between $11.5 billion and $12 billion. Of that amount, Dell Technologies will receive $9.3 billion to $9.7 billion, which the company said it intends to use to pay down debt.

Dell Technologies shareholders will also receive about 0.44 shares of VMware per Dell share they hold, the announcement said.

The news comes as VMware searches for a new CEO. Former CEO Pat Gelsinger left to take the helm of Intel, with VMware chief financial officer Zane Rowe becoming interim CEO. Upon completion of the spinoff, Rowe will remain interim CEO and Michael Dell will remain chairman and chief executive officer of Dell Technologies and chairman of the VMware board.