By Molly Schuetz
Shares in computer services firm VMware — whose main Irish offices are in Cork —plunged yesterday after broadcaster CNBC reported it is considering acquiring Dell Technologies in a reverse merger, bringing Dell back to markets in what could be the industry’s biggest deal ever.
VMware, which was absorbed by Dell in its $67bn (€53.9bn) acquisition of EMC, could now turn around and buy Dell, CNBC reported.
In a reverse merger, VMware would issue shares to Dell’s private owners, which could then sell the stock on the public market, giving them a way to profit from having taken Dell private in 2013 and to help pay off some of its $50bn in debt, CNBC said. Dell, which owns about 80% of VMware, is considering various options, including a public stock offering, sources told Bloomberg last week.
The company’s board is meeting later this month to discuss the options as it seeks ways to boost revenue and raise funds. VMware dropped up to 11% in the US, the steepest decline in two years, after the CNBC report. Dell founder and chief executive Michael Dell took his company private in 2013, when he teamed up with Silver Lake Management on a leveraged buyout.
That freed Dell to cut costs and work to become a bigger supplier of hardware and software for corporate data centres without the quarterly investor scrutiny that comes with being a public company.
Three years later, Dell acquired storage company EMC and its majority stake in data-centre software vendor VMware, taking on a massive debt load to seal the deal. VMware has a stock- market value of $55.4bn. At the end of 2016, an estimated 50 Cork-based jobs were cut at the then newly merged company Dell-EMC.
The development was due to the overlap of job functions brought about by Dell’s takeover of EMC. Worldwide, the combination was estimated to cost 2,000 to 3,000 jobs. The combined businesses employ 5,500 people here. EMC employs 3,000 people in Ovens, Cork, and Dell has around 2,500 people across facilities in Limerick, Cork, and Dublin. EMC has, for some time, been one of the biggest private sector employers in Munster.
Dell Technologies includes cybersecurity firm RSA; consultancy Pivotal; hardware manufacturer Dell; as well as VMware.
Bloomberg and Irish Examiner staff