Dell Shares Jump As Report Says Company Considering Options For Its 81% Stake In VMWare

The shares of Dell Technologies Inc. DELL and VMware Inc. VMW jumped in the pre-market session on Wednesday.

What Happened

Dell is considering options for its 81% stake in the cloud company, including creating a spinoff, the Wall Street Journal reported earlier in the day.

People familiar with the matter told the Journal that the veteran computer technology company believes its core personal-computer and data-storage business is undervalued in its market valuation in favor of VMware.

Making two standalone companies could increase the market value of one or both of the businesses, the Journal reported.

The discussion is in the early stages, and Dell is considering all options, including unloading its entire stake or purchasing the rest of the shares in VMware.

Why It Matters

Dell had come to hold a majority stake in VMware as part of its acquisition of EMC Corp. in 2016. Over the years, cloud computing has become a more profitable business than Dell's core business of personal computers.

VMware beat analyst expectations for the first quarter this year, as reported by Barron's, and acquired cybersecurity startup Lastline earlier this month.

Price Action

Dell shares added nearly 17% in the pre-market session at $57.16 after closing the regular session at $49.01. VMware shares were up 13.77% in pre-market at $163.

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