Dell Technologies announces possible IPO or a business merger with VMware

In an SEC filing on Friday, Dell Technologies revealed that the company is ‘evaluating potential business opportunities’ including a possible IPO, or a business combination with VMware.

The largest privately held technology company might not be private anymore. Last week, rumors were rife that the company was looking to either grow with more acquisitions or go public. In a regulatory SEC filing on February 2, the company confirms that it is looking to explore an IPO or a merger with VMware. An initial public offering (IPO) would undo one of the biggest leveraged buyouts of the tech industry.

Founder and CEO Michael Dell took his company private in 2013 for USD 25 billion, backed by Silver Lake Partners and a loan of USD 2 billion from Microsoft. Three years later, Dell acquired EMC for a whopping USD 67 billion in September 2016, in what is considered to be the largest acquisition in the technology industry. The acquisition landed the company in a debt of over USD 46 billion, which includes bonds worth USD 3 billion set to mature in 2018 and over USD 4 billion due in 2019.


2004: Dell acquires VMware

2007: 15 percent of VMware shares go public priced at USD 29 per share, ending the day at USD 51 per share.

2013: Michael Dell and Silver Lake Partners take Dell private, backed by a USD 2 billion loan from Microsoft.

2015: Dell announces EMC acquisition.

2016: Dell completes EMC acquisition for USD 67 billion, and a new parent company, Dell Technologies was born.

An IPO would certainly help in raising funds and help the company pay off some of its debts, especially after the EMC acquisition failed to meet financial targets. The other option would be to combine with VMware, giving Dell Technologies access to its USD 11.6 billion cash.

VMware is already 82 percent owned by Dell. In a 2015 blog post, Michael Dell referred to VMware as “a crown jewel of the EMC federation,” and wrote that it would grow “as an independent company with an independent and open ecosystem.”

Their latest SEC filing sure hints at a change, especially as VMware’s shares have gained over 62 percent in the last one year. Stocks, however, fell by 3 percent on January 30 to USD 118, and stands at USD 122 as of Friday, February 2.

Another alternative would be what CNBC referred to as a “reverse merger” last week, where VMware would buy Dell thereby allowing the latter to trade publicly without going through a formal listing. At the time, neither Dell nor VMware were available for comment.

The SEC also states that the company might neither go public nor merge with VMware, and instead “continue with the existing ownership structure.” The filing also states that nothing has been decided and alternatives are being considered.

“While this process continues, it is business as usual for team members, customers and partners with no changes to current structures, practices and processes,” the filing says. “There will be continued press coverage and speculation, and it’s important to stay focused on delivering for customers and closing the quarter strongly.”

While Dell can keep its “deliberations confidential”, a public filing is necessary considering the company's huge stake in VMware.

If the merger does take place, the software offerings of VMware combined with the hardware expertise of Dell Technologies will surely be something that their competitors need to keep an eye on.