Dell Shares Rise on Plans to Spin off VMware Unit

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April 15 Reuters Shares of Dell rose nearly 8 in premarket on Thursday, a day after the PC maker said it would spin off its majority stake in cloud computing software maker VMware, which would trim down its business and make the firm nimbler.

The spinoff of its 81 stake in VMware, first proposed in a filing last July, would also help Dell lower its longterm debt of 41.62 billion, much of which was taken on during its 2016 acquisition of data management firm EMC.

Wall street analysts saw benefits in the spinoff, but some also raised longterm concerns about companys core business.

Our underlying concerns remain on the longerterm positioning of core Dell, Credit Suisse analysts wrote in a note.

VMware, currently Dells bestperforming unit, can now strike more partnerships with major cloud computing providers including Amazon.com Inc and Microsoft Corp, which are also the parent companys primary technology competitors.

The unit has benefited from companies shifting to the cloud during the COVID19 pandemic.

Through the spinoff, VMwares share structure will be simplified and that could permit the inclusion of VMware and Dell into the SP 500 index, J.P. Morgan analyst Paul Coster said in a note

The spinoff likely eliminates the conglomerate discount that applied to Dells VMware stake, Coster added.

Dell is also exploring options including a potential sale of its cloud business Boomi, which could be valued at up to 3 billion, Bloomberg News reported on Wednesday….

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