VMware, valued at $64 billion, looks for new cloud partners as Dell sheds debt
VMware is on its own again. The telco cloud provider announced Monday that its spinoff from Dell Technologies is complete. The spinoff, first announced earlier this year, divests Dell of its 81% equity ownership in VMware and creates an independent cloud software and services company valued at $64 billion.
Over the past few days, VMware and Dell have announced the distribution of 30.67 million VMware Class A shares and 307.22 million VMware Class B shares to Dell stockholders. The final distribution ratio will give Dell shareholders about 0.44 shares of VMware Class A common stock.
VMware has also distributed a cash dividend of $11.5 billion, $9.3 billion of which includes Dell. Dell will use these funds to pay down debt.
VMware and 5G
VMware announced its 5G Telco Cloud Platform in 2020. Based in Kubernetes, VMware Telco Cloud helps operators “build, manage and run containerized workloads across private, telco, edge and public clouds.”
VMware is also putting considerable effort into RAN disaggregation efforts. It announced VMware Telco Cloud Platform RAN earlier this year, an effort to virtualize radio access network (RAN) functions and implement an open RAN architecture. It’s working with Dish Network to implement Open RAN functionality on its greenfield 5G network. VMware is also working with Italian operator Telecom Italia (TIM) to test Open RAN systems in the Italian cities of Matera and Turin, following an initial test in Faenza. Vodafone Group also tapped VMware and others to help with its Open RAN efforts, which are still in the lab at this point.
On its own again
This marks a new chapter for VMware. Virtual Machines (VMs) and virtualization technology was still largely a curiosity on PCs in 1999. That year it launched Workstation, which enabled users to install multiple operating systems on a single computer. VMware’s ESX hypervisor technology helped launch the virtualization tech into data centers. EMC Corp. acquired VMware in 2003 for $695 million. Dell later acquired EMC in a $67 billion deal in 2016.
“As a standalone company, we now have the flexibility to partner even more deeply with all cloud and on-premises infrastructure companies to create a better foundation that drives results for our customers. And the increased flexibility we will have to use equity to complete future acquisitions will help us remain competitive,” said VMware CEO Raghu Raghuram in a blog post.
VMware and Dell said they will continue working together. Collaborative efforts include VMware Cloud on Dell EMC, which mates VMWare’s cloud tech to Dell’s high performance data center hardware. 5G Telco Cloud and other projects will also continue.
VMware will use Dell Financial Services and the companies will continue co-development of products, and sales and marketing activities.
And while this deal puts VMware on its own, Dell founder Michael Dell still has a strong stake in its success. Dell and his private equity partner Silver Lake own a majority stake in the new business, and Dell is VMware’s board chair.
