Dell Technologies, one of the largest computing and electronics company is considering selling to VMware in a reverse merger. Dell owns and controls 80% of the cloud computing company and if it goes on with the sale, Dell might become a public company.
In the reverse merger, VMware would buy Dell which would allow Dell to be traded publicly without undergoing a formal public listing. Dell acquired VMware when it purchased EMC in 2015 for $67 billion, a deal that was completed in 2016.
VMware’s pioneer virtualisation platform software allowed companies to setup multiple virtual computers on a single piece of hardware helping them run large computers in their data centers more efficiently.
The problem today is that most companies have shifted most of their infrastructure off site to larger cloud service providers like Amazon, Google and Microsoft. VMware is aware of this and it allowed customers to use its software on its rival, Amazon’s cloud service in 2016.
If this reverse merger were successful, it would be the biggest deal in tech history since it would allow the investors who backed Dell to go private in 2013 ($24.4 billion) – 88,513,440,000,000 ugx to monetise. Dell would also be able to pay back some of the $50 billion debt it has.
Currently, Dell’s private owners are Michael Dell and Silver Lake and its real valuation is not known. VMware has had growing revenue annually like the 6.7% growth in 2016 giving it a net income of at least $1.2 billion that year.
The decision is not final yet, this is just one of the strategic options Dell and its advisers are looking at as well as the option of totally buying the remaining stake of VMware. There is no comment from Dell since most of the discussions are still private.
Lawk is a mozillian, writes for Spur, Newslibre and consults part time for Every1Mobile and Innovware.
He loves open source, the open web, writing, reading and developing literacy tools that can teach the youth around the world especially in East Africa.