Dell Weighs Strategic Alternatives -- WSJ
January 26 2018 - 3:02AM
Dow Jones News
Options could include an IPO and deal with VMware; review is at
preliminary stage
By Dana Cimilluca and Dana Mattioli
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 26, 2018).
Dell Inc. is considering a range of strategic alternatives that
could transform the maker of PCs and data-storage devices,
according to people familiar with the matter.
In the review, which is in a preliminary stage, the closely held
technology giant is expected to explore options including an
initial public offering and a purchase of the rest of VMware Inc.,
a publicly traded cloud infrastructure company, the people
said.
VMware has a market value north of $50 billion. Talks between
the companies are at an early stage, one of the people said.
It wasn't clear what other options might be on the table. If
Dell pursued a public listing, it would be one of the biggest IPOs
in recent years and could provide a shot in the arm for the
sluggish new-issue market. An IPO also could provide the company
with cash to invest in the business and pay down debt.
That or a full takeover of VMware would be the latest in a
series of big deals that have transformed Dell in the last five
years -- and loaded it with debt.
The company went private in a roughly $25 billion leveraged
buyout in 2013 by its founder, Michael Dell, and investment firm
Silver Lake. In 2016, Dell bought data-storage company EMC for $67
billion in the largest technology takeover ever.
When the deal closed in late 2016, Dell employed about 140,000
people globally and had $74 billion in revenue. It said it would
maintain operations in Hopkinton, Mass., where EMC, a pioneer in
data storage, was located. It is now the world's largest privately
controlled tech company.
Mr. Dell indicated at the time that the company still had an
appetite for acquisitions.
But the deal making has added a significant amount of debt to
Dell's balance sheet. The company currently has about $51 billion
of debt, according to S&P Capital IQ.
Dell, which pays roughly $2 billion in annual interest on its
debt, is among the heavily indebted companies that is expected to
be hurt by the tax bill Congress passed at the end of last year.
The new tax law caps companies' ability to deduct interest expense
from their taxes at 30% of earnings before interest, taxes,
depreciation and amortization.
Once the largest personal-computer maker, Dell is now known as
much for its corporate products such as storage, servers and
security software following the EMC deal. It is also joining the
crowded field of companies wagering big money on the so-called
Internet of Things, as the computing giant looks for new avenues of
growth amid a shift in corporate spending to the cloud.
The Round Rock, Texas, company recently said it would commit $1
billion over three years to research and development to create
hardware and software that would help manage billions of everyday
devices connected to the web.
Silver Lake, which maintains a big stake in Dell, has a history
of backing the deal making of its portfolio companies. In addition
to Dell, it has done so at Broadcom Ltd., which is pursuing a $105
billion hostile takeover of Qualcomm Inc., and Symantec Corp.,
which has bought a string of cybersecurity companies.
VMware, based in Palo Alto, Calif. produces software related to
databases, storage and the Internet of Things. When Dell bought EMC
in 2016, EMC owned 80% of VMware.
Write to Dana Cimilluca at dana.cimilluca@wsj.com and Dana
Mattioli at dana.mattioli@wsj.com
(END) Dow Jones Newswires
January 26, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Dell Technologies Inc. (NYSE:DVMT)
Historical Stock Chart
From Jun 2024 to Jul 2024
Dell Technologies Inc. (NYSE:DVMT)
Historical Stock Chart
From Jul 2023 to Jul 2024