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Dell, VMware Shares Surge Following Report of Possible Spinoff

Shares of Dell rose late Tuesday on a report of a possible major restructuring of its business.

The restructuring could include a spinoff of its stake in VMware, according to the WSJ. Dell shares were up 18% in after hours trading after closing at $49.01 per share on Tuesday, and VMware’s stock rose 8.4% after hours after ending Tuesday’s session at $149.23.

The WSJ reported that Dell is considering unloading its sizable stake in VMware, worth about $50 billion, but is also weighing an outright purchase of the cloud software firm. Dell is the largest shareholder in VMware, with an approximately 81% stake in the company.

In its most recent earnings report, Dell reported revenues of $21.9 billion for the quarter ending May 1, roughly flat compared to the year earlier. VMware revenue $2.8 billion, representing growth of 12% year-over-year “driven by broad-based strength across a diverse product portfolio,” according to Dell.

VMware’s total market capitalization is about $62.5 billion, and its stock is down 4% year to date. It’s considered an industry leader in virtual machines for data-center servers and computer desktops, technologies that help businesses to access disparate computer systems as a single network.

Dell initially accumulated shares in VMware by way of its 2016 acquisition of the storage hardware firm EMC.

Earlier this year, Dell announced plans to sell its RSA cybersecurity unit for $2.08 billion to a group that includes private-equity firm Symphony Technology Group, Ontario Teachers’ Pension Plan Board and the PE firm Carlyle Group’s AlpInvest Partners.

Shares of Dell have slipped 7% year to date.