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VMware Might Buy Dell in Merger Switcheroo

Merger rumor

**Editor’s Note: Please click here for a recap of the biggest channel-impacting merger and acquisition news from November and December.**

Might Dell once again become a public company?

That’s the speculation on Monday after a CNBC report, citing “people familiar with the matter,” claimed that VMware might buy Dell Technologies in a “reverse merger” that could be the largest deal in tech history. Dell owns 80 percent of VMware, the virtualization giant that’s worth about $60 billion.

One of the unnamed sources said Dell would neither sell its stake in VMware nor put itself on the auction block. This news comes less than three years after Dell bought EMC – VMware’s former majority owner – for $67 billion.

So what gives? It’s the giant cloud providers, such as Amazon and Microsoft, that are gobbling up the bulk of business customers moving their infrastructures to the cloud.

But that’s not all. As Lynn Haber points out in this Channel Futures article, Dell’s fortunes have gone south a bit thanks to the new tax law that President Trump signed last month.

“What the tax-bill decision means to the company is its ability to deduct interest from its taxes; Dell reportedly pays about $2 billion per year in interest on the approximately $46 billion it borrowed for the EMC acquisition,” she wrote. “Even if Dell isn’t retiring debt, it needs to pay the annual interest loan payment just to maintain status quo. The new tax law effectively increased the cost of the EMC acquisition.”

Dell and VMware reps wouldn’t officially comment on the CNBC article. The sources said a reverse merger is one of the more drastic measures being considered, and Dell’s board will get together in February to consider a number of different options.

Kevin Rhone of Enterprise Strategy Group told Channel Futures that all of this talk of acquisitions and reverse mergers doesn’t change the company’s approach to the channel, which is focused on its investment in digital transformation. Matthew Eastwood of researcher IDC echoed those sentiments, saying partners need “not get too worked up” about it.

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