Dell Confirms Talks With VMware For Potentially Huge Tech Deal

• Dell Technologies on Friday confirmed that it is considering a series of options.
• Among its considerations is combining with VMware or making a public offering of Dell.

Dell Technologies confirmed Friday it was considering a number of options, which are combined with VMware or a Dell public offering.

CNBC reported earlier this week that Dell Technologies could emerge as a public company through a reverse merger with VMware, the $ 50 billion cloud computing company it already controls.

Dell did not provide details on how an agreement with VMware would be structured and reiterated in the statement that "nothing has been decided and alternatives are being considered at this stage".

VMware, which saw its headline rise by about 1% in pre-market trading in this news, issued its own press release on Friday morning, but did not drill down on details of a possible deal with Dell.

"Dell has been a great partner since becoming our majority owner, and we have accelerated our growth," VMware CEO Pat Gelsinger said in his release. "We look forward to Dell's continued support as we work to execute our growth plans in the coming years."

VMware was considered the jewel of the crown in 2015 when Dell acquired EMC for $ 67 billion. This gave Dell 80% of VMware, which was one of the first pioneers in a technology called virtualization. This process has allowed organizations to more efficiently manage large computers in their data centers by consolidating multiple "virtual" computers into a single hardware.

Exclusive: Dell, VMware Decide To Explore Options Including Merger - Sources

(Reuters) - US computer maker Dell Technologies Inc. and enterprise software provider VMware Inc. have decided to explore options that could include a possible merger of the two companies, said Thursday people close to the case.

The measure, which could not lead to any agreement is presented as Dell, the world's largest private technology company, seeking new avenues for growth after acquisition burdened with data storage provider EMC debt Corp. for $ 67 billion million in 2016.

Dell plans to announce Friday it will consider a potential reverse merger with VMware, as well as other alternatives, including an IPO or asset divestitures, the three sources.

VMware plans to announce the creation of a special committee of board members to consider a combination with Dell, sources said. VMware is 80 percent owned by Dell, so the special committee aims to make any combination subject to the approval of unintended directors to safeguard the interests of minority shareholders of VMware, according to the same sources.

The requested sources not to be identified because the case is confidential. Dell declined to comment, while VMWare did not immediately respond to a request for comment.

Dell is under pressure to increase profitability after the agreement EMC has not achieved the projected cost and performance savings, while higher component costs and the difficult data storage market have eroded margins.

The Round Rock, Texas-based company has struggled with fierce competition in the storage market, as cloud computing rivals such as Amazon.com Inc.'s AWS and Microsoft Corp's Azure put pressure on price The chief of the Dell's infrastructure, former EMC CEO David Goulden, left the company last fall and since then the company has been working on reorganizing its storage operations.

The PC market, Dell CEO Michael Dell, helped shape the Dell foundation in 1984 as a freshman year with savings of $ 1,000, it remained stagnant because of the popularity of smartphones and tablets, which is down 0.2% in 2017, according to International Data Corporation. .

A reverse merger would see VMware, which has a market capitalization of $ 51 billion, buy Dell, instead of Dell buying the minority stake in VMware that it does not have yet. A blocking clause prevents Dell from purchasing VMware before September.

"Whether VMware or Dell are the acquirers, we believe that the terms of the deal should involve a premium to minority shareholders of VMware," he wrote in a research note analyst at UBS Securities LLC, Evren Ergin.

Another consideration for Dell in its deliberations is possible to provide Silver Lake private equity firm to withdraw its investment in the way the company. Silver Lake helped finance the $ 24.9 billion Michael Dell transaction in 2013 to privatize the company and holds approximately 18 percent of the company.