Should I sell my shares in VMware?

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According to a press report, the computer company Dell Technologies could part with its software subsidiary VMWare. Good news for VMWare investors.

Dell has recently begun to examine options for a sale of the 81 percent stake or other steps such as a complete takeover, reported the Wall Street Journal on Tuesday, citing people familiar with the matter. The process is in an early phase. Dell shareholders celebrated. The share price soared in the pre-market US trade by 16 percent.

In the event of a sale of the VMWare stake, investors could look forward to a rain of money. Dell's stake in WMWare is worth around 50 billion US dollars (around 44.5 billion euros) based on the closing price on Tuesday. VMWare shares recently gained nine percent in pre-market US trading.

"It's too early to pop the champagne corks."

Market experts placed particular emphasis on the potential for investors in VMWare. James Fish, analyst at the financial services provider Piper Sandler, sees the sale of the shares as the possibility of a takeover of VMWare by a large cloud company. The value of the shares could also rise from the current $ 149 to over $ 200.

“It's too early to pop the champagne corks,” said Daniel Ives, an expert at Wedbush, although he believed a tax-free spin-off was the most likely. Due to the many turns in the relationship between Dell and VMWare, it could be that in the end nothing will change in the structure.

Dell has high debt

A possible sale could have a positive impact on the Group's high debt burden. The debt level was in May, according to statements of CFO Tom Sweet during the figures announcement for the first quarter at 57.3 billion dollar. Dell acquired the EMC conglomerate for $ 67 billion in September 2016, including cloud computing and virtualization provider VMWare.

In addition to the historical debt burden, the corona crisis is affecting business. Although the company was able to benefit from the move to the home office, the demand from small and medium-sized companies declined in the first quarter, said Dell CEO Jeff Clarke at the end of May. The acquisition of the remaining shares in VMWare, which is also in the room, would again significantly increase the debt burden. According to Sweet, the company is more focused on deleveraging. dpa

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