Dell stock price surges 15% on report of plans for strategic shakeup with VMware

Dell stock price surges 15% on report of plans for strategic shakeup with VMware
  • Dell and VMware discussing numerous options in relation to Dell’s 81% stake in the software giant
  • Dell’s stake is worth around $50 billion in today’s market
  • Shares of Dell and VMware have surged 15% and 10% respectively in premarket trading

Shares of Dell Technologies (NYSE: DELL) are up around 15% in premarket trading after a report emerged that the tech giant is considering what to do with its position in VMware (NYSE: VMW).

Fundamental analysis: Dell considering its options

Dell Technologies is said to be considering its options relating to its stake in a cloud-software company VMware. The PC-maker owns more than 81% of VMware, a stake that is worth around $50 billion in today’s market.  

The Wall Street Journal reported that Dell is exploring its options, that range from selling its stake to buying the rest of the company. The review process is at an early stage and no decision is imminent.

“Dell is extraordinarily supportive of an independent VMware,” CEO Pat Gelsinger said last year.

VMware represents one of the best-performing assets. It accounts to 13% of Dell’s total revenue. The company’s revenues are constantly on the rise with a surge of 12% in the last quarter. 

Invezz reported earlier that Dell Technologies decided to sell its cybersecurity unit RSA to STG Partners LLC for $2.08 billion.

VMware stock price also surged higher on reports, trading as much as 10% higher in premarket trading. 

Technical analysis: New multi-month highs

Dell stock price surged as much as 18% in after-hours trading on Monday, before returning a portion of gains to finally trade around 14% in the green before the opening bell in New York. As a result, shares of Dell hit a multi-month high above the $55 mark.

Dell stock daily chart (TradingView)

Evercore ISI analyst Amit Daryanani said earlier that Dell shares might be worth as much as  $80 a share. His calculation is based on “using a fairly conservative set of assumptions surrounding the valuations of individual business units”. Dell share price closed at $49.01 yesterday. 

The buyers will now fight to secure a close above the $56 mark where November 2019 highs are located. On the downside, Dell stock price is supported by a horizontal resistance around the $52 handle. 

Summary

Shares of Dell and VMware are up 15% and 10% respectively in premarket trading after the WSJ reported that the PC-maker is considering its options. Dell owns an 81% stake in the software giant, worth around $50 billion. 

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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