It was announced on Wednesday, After months-long negotiations, Dell Technologies plans to spin off its 81% ownership stake in VMWare.
The move will create two separate companies and generate around $9 billion in proceeds for Dell. Dell (DELL) said in a statement that the two firms will maintain their “mutually beneficial strategic relationship and continue to co-engineer solutions for customers.”
The news sent Dell’s stock soaring as much as 9% in after-hours trading.
“By spinning off VMware, we expect to drive additional growth opportunities for Dell Technologies as well as VMware, and unlock significant value for stakeholders,” Dell CEO Michael Dell said in a statement.
“Both companies will remain important partners, providing Dell Technologies with a differentiated advantage in how we bring solutions to customers.
“VMWare (VMW), the cloud computing and virtualization software firm that allows businesses to run various operating systems on their devices, first joined Dell Technologies in 2015 as part of its blockbuster $67 billion acquisition of corporate software, storage and security giant EMC.
The deal was crucial for Dell at the time, as the company was struggling to keep up with new trends and competitors in its core PC and server businesses. However, growth in demand for hardware tech products during the pandemic has been a boost to Dell’s business — a trend that analysts expect will continue as the economy recovers.
Dell reported a record full-year revenue of $94.2 billion last year, and its stock is up more than 83% since the start of 2020.