Dell Investor Relations Roadshow: 4 Reasons Dell-VMware Is A Winning Hand

Dell Hitting The Road

Dell Technologies Chief Financial Officer Tom Sweet Thursday told Wall Street analysts that the company plans a series of roadshow meetings with investors both in one-on-one and group settings across the country to make a case for the planned buyout of the VMware tracking stock.

Under the terms of the proposed buyout, shareholders of the DVMT tracking stock would exchange each share of DVMT tracking stock for 1.3665 shares of Dell Technologies Class C common stock or $109 per share with the aggregate, not exceeding $9 billion.

The proposed $21.7 billion tracking stock buyout effectively marks the return to the public market by Dell Technologies – five years after Dell founder and CEO Michael Dell took the company private in one of the largest private equity buyouts ever.

As part of the deal, VMware's board of directors has voted to declare an $11 billion cash dividend to all VMware shareholders contingent on the completion of the deal.

After the deal is completed, VMware would maintain its independent status as a publicly traded company, with Dell continuing to own 81 percent of VMware common stock.

Dell-VMware Customer Wins

Dell Vice Chairman Jeff Clarke Thursday told analysts that the Dell-VMware combination is driving big wins in the sales trenches, including one of the largest VxRail hyper-converged deals in the company's history.

"During Q2, we completed one of the largest VxRail hyper-converged infrastructure deals in our history -- implementing a 1,200-store data center refresh," said Clarke. "It was another great win across our teams for Dell and VMware."

Clarke also said a U.S.-based supermarket chain replaced a competitor when building out a new data center by leveraging Dell PowerMax storage.

"The company already had tier-one applications running VMware workloads, so [this is] another great example of the cross-sell opportunities we can drive," said Clarke. "These are both great proof points of the synergies we are realizing across the Dell Technologies portfolio on how we're differentiated in what we can offer our customers."

Tighter Dell-VMware Integration At VMworld

At VMware's VMworld 2018 last week in Las Vegas, Dell announced a slew of new enhancements that tighten the Dell-VMware technology strategy.

Dell EMC synchronized its VxRail appliance and VMware vSAN update releases, so customers get the latest technology features as quickly as possible.

Dell EMC also enhanced Dell Provisioning for VMware Workspace ONE service to enable automatic device setup and extend the efficiencies of cloud management to configuration and deployment.

"These new solutions and enhanced integrations provide our customers with a unified, seamless experience across PC and mobile devices, software-defined data centers, hyper-converged infrastructures and multi-cloud platforms," said Clarke.

VxRail Now $1 Billion

For its second fiscal quarter, Dell reported that sales of its Dell-VMware hyper-converged infrastructure offerings increased by triple digits year-over-year.

VxRail, which includes Dell hardware and VMware software, is now above a $1 billion annualized run rate for the first time ever.

"We have a unique value proposition, which is from the edge to the core to the cloud," said Clarke. "We are a one-stop shop that provides a full set of solutions for our customers. That's particularly important as our customers are transforming their business through digital transformation."

Dell EMC and VMware were both named 'leaders' in Gartner's 2018 Magic Quadrant for Hyper-Converged Infrastructure.

$700 Million In Growth Synergies For VMware

Dell's CFO Sweet said VMware would generate an additional $700 million in bookings in fiscal year 2019 as a result of its affiliation with Dell.

"We continue to see strong cross opportunities as we leverage both the Dell Technologies and VMware sales forces. VMware expects to realize an estimated $700 million of incremental annual bookings in fiscal year 2019 working with Dell Technologies," said Dell CFO Sweet.

In the announcement of the proposed VMware tracking stock buyout, Dell CEO Michael Dell said in a statement that VMware has "thrived as part of the Dell Technologies family and has seen tremendous traction and strategic relevance with all customers resulting in significant revenue growth and financial performance."

Furthermore, Dell said that after the transaction concludes, he looks forward to VMware's "continued independent status, strategy and capital allocation policy for organic investment, M&A and shareholders returns."