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Dell Technologies Inc Class C DELL

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Morningstar’s Analysis

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VMware's Special Dividend Payment and Spin-Off Expected Nov. 1; Shares Undervalued

Mark Cash Senior Equity Analyst

Analyst Note

| Mark Cash |

Narrow-moat VMware provided an update on its upcoming spin-off from no-moat Dell Technologies. It will pay an $11.5 billion special dividend to all VMware shareholders with a record date of Oct. 29 and payment date of Nov. 1. The update does not change our fair value estimate of $202 for now, although we anticipate lowering our valuation by the amount of the special dividend per share when it is paid out. The actual payment amount will be known after the market closes Oct. 29 (we anticipate it will be around $27.40 per share); VMware’s ex-dividend trading date is Nov. 2. We view VMware's shares as undervalued and believe the company can catalyze growth as a stand-alone organization and remain a crucial layer for developers, infrastructure, and security teams in a cloud-first world.

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Company Profile

Business Description

Dell Technologies, born from Dell's 2016 acquisition of EMC, is a leading provider of servers and storage products through its ISG segment; PCs, monitors, and peripherals via its CSG division; and virtualization software through VMware. Its brands include Dell, Dell EMC, VMware (expected to be spun off toward the end of 2021), Boomi (expected to be sold by the end of 2021), Secureworks, and Virtustream. The company focuses on supplementing its traditional mainstream servers and PCs with hardware and software products for hybrid-cloud environments. The Texas-based company employs around 158,000 people and sells globally.

One Dell Way
Round Rock, TX, 78682
T +1 800 289-3355
Sector Technology
Industry Computer Hardware
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Cyclical
Employees 158,000