Shares of Dell, VMware spike on report that Dell is considering options for its $50 billion stake in the company

Key Points
  • Dell owns about 81% of VMware.
  • In 2018 one option was for VMware to buy Dell, but Dell ended up going public instead.
Dell CEO Michael Dell delivers a keynote address during the 2013 Oracle OpenWorld conference in San Francisco, Sept. 25, 2013.
Justin Sullivan | Getty Images

Shares of computer maker Dell Technologies and enterprise software company VMware are up as Dell reportedly considers what to do with its position in VMware.

Dell rose as much as 21% in extended trading on Tuesday after the Wall Street Journal, citing unnamed sources, said the company looked into buying out the minority stake of VMware that it doesn't already own or selling its share of VMware.

VMware shares were up more than 11% following the report.

Both companies declined to comment. 

Dell shares are down about 5% since the beginning of the year, while VMware is down less than 2%, as VMware seeks to grow from companies transitioning to public clouds. VMware formed a partnership with top cloud provider Amazon in 2016. Dell's revenue was roughly flat year over year in the quarter that ended on May 1, while VMware's portion of the revenue, representing about 13% of Dell's total revenue, was up 12%.

Dell controlled about 81% of VMware's outstanding common stock and about 97% of the combined voting power of VMware's outstanding common stock as of May 1, according to VMware's most recent earnings report.

In 2018 Dell returned to public markets after going private in 2013. One option before the 2018 initial public offering was that VMware could buy Dell in a reverse merger, CNBC reported; that did not end up happening. Dell originally picked up the VMware shares through its $67 billion acquisition of storage hardware maker EMC, which closed in 2016. EMC closed the VMware acquisition in 2004, and in 2007 VMware went public.

"Dell is extraordinarily supportive of an independent VMware," VMware CEO Pat Gelsinger told CNBC last year.

-- CNBC's Steve Kopack contributed to this report.

Watch Jon Fortt's interview with VMware's Pat Gelsinger from the CNBC @Work Spotlight event, and register to join our next @Work livestream for more on tech, transformation and the future of work.

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