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Dell Gains Approval to Repurchase VMware (VMW) Tracking Stock

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Dell Technologies is coming back to public market, after it recently won more than 61% shareholder vote to buy back the VMware (VMW - Free Report) tracking stock.

Notably, in 2016, Dell acquired EMC Corporation and its 82% controlling stake in VMWare for $67 billion. The company paid EMC shareholders partially in cash along with a Class V tracking stock that traded under the symbol DVMT.

In July, Dell offered to buy back shareholders of DVMT with cash and a newly-issued Class C stock, which would then trade on the New York Stock Exchange, thereby making the company public again. The complex process would help Dell to avoid an Initial Public Offering (IPO).

However, Dell’s initial offer price of $109 per share ($21.7 billion in cash and stock) was rejected by activist investor Carl Icahn and other hedge funds. They believed that Dell was massively undervaluing the tracking stock.

Following the resistance, Dell amended its proposal, under which each Class V stockholders can elect to receive $120 per share in cash, subject to an aggregate $14 billion cap, or between 1.5043 and 1.8130 shares of Class C common stock.

Post the shareholder’s approval, Dell’s Class C shares will start trading on the New York Stock Exchange under the symbol DELL from Dec 28.

How VMware Benefits Dell

VMware is the most important business inside Dell’s family of solutions right now. Dell’s return to public market is expected to benefit VMware, as the former is likely to invest more in developing its expertise in the fast-growing hybrid cloud market.

VMware, Inc. Price and Consensus

VMware, Inc. Price and Consensus | VMware, Inc. Quote


Notably, VMware is a dominant provider of virtualization software. VMware’s dominance in software-defined data center (SDDC) along with an expanding customer base in cloud, driven by partnerships with the likes of IBM (IBM - Free Report) and Amazon Web Services (AWS), bodes well for Dell.

Moreover, VMware is well poised to benefit from the increasing adoption of cloud-based solutions. The company has been consistently taking initiatives to diversify its product portfolio to include most of the IT infrastructure.

Further, acquisitions of CloudHealth Technologies, Desktone and Airwatch have significantly strengthened its position in this regard. Moreover, continuing enterprise deal wins will drive growth in the long haul.

Zacks Rank & Other Stocks to Consider

Currently, VMware has a Zacks Rank #2 (Buy).

Cadence Design Systems (CDNS - Free Report) and Symantec (SYMC - Free Report) are top-ranked stocks in the same industry. Both flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Expected long-term earnings growth rate for Cadence and Symantec is 12% and 7.9%, respectively.

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