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Dell explores potential merger with VMware

Liana B Baker, Sonam Rai, Reuters Feb 5 2018, 0:52 IST
FILE PHOTO: A Dell gaming computer is shown at the E3 2017 Electronic Entertainment Expo in Los Angeles, California, U.S. June 13, 2017. REUTERS/ Mike Blake/File Photo

FILE PHOTO: A Dell gaming computer is shown at the E3 2017 Electronic Entertainment Expo in Los Angeles, California, U.S. June 13, 2017. REUTERS/ Mike Blake/File Photo

Computer maker Dell Technologies Inc has said that it was considering a public offering of its common stock or a combination with business software maker VMware Inc , its publicly held subsidiary, as it seeks new avenues for growth.

The world's largest privately held technology company is under pressure to boost profits after its debt-laden acquisition of data storage provider EMC Corp for $67 billion in 2016 failed to meet its financial targets, hurt by higher component costs and pricing pressures.

It also faces increased competition in its core hardware businesses - PCs, servers and storage equipment - from cloud-based services provided by Amazon.com Inc, Microsoft Corp and others.

"As part of our ongoing multi-year strategic planning, Dell Technologies is evaluating a number of potential business opportunities," founder Michael Dell said in a blog post. "We do this from a position of strength, with a desire to grow Dell Technologies and its businesses even faster and thrive in the very dynamic IT marketplace."

Reuters had reported that Dell planned to review a possible reverse merger with VMware, as well as other options, including an IPO or asset sales. Sources told Reuters that VMware was likely to form a special committee to consider a combination with Dell.

Round Rock, Texas-based Dell went private five years ago in a $24.9 billion deal with private equity firm Silver Lake.

Dell said that nothing had been decided and that the company might end up continuing to operate under its current structure.

Shares in VMware, which is 82% owned by Dell, were up less than 1% at $126.50 on Thursday.

VMware said it would not speculate on the outcome of Dell's review.

"The board of directors follows sound corporate governance practices, and will continue to do so in connection with any potential transaction involving our controlling stockholders," VMware's lead director Paul Sagan said in a company statement.

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