Dell, VMware Shares Rise in After-Hours Trading on Possible Spinoff

The potential deal was reported earlier, but had not yet been confirmed by either company.
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Shares of Dell and VMware were up in after-hours trading on Wednesday after Dell said it is "exploring" a spinoff of VMware. 

Dell made the announcement in a news release sent after close of trading on Wednesday, writing that a "potential deal could unlock value for shareholders." Dell owns a 81% stake in VMware.

"Although this exploration is in an early stage, Dell Technologies believes a spin-off could benefit both Dell Technologies and VMware shareholders, team members, customers and partners by simplifying capital structures and creating additional long-term enterprise value," the company wrote. "Any potential spinoff would not occur prior to September 2021 and would be intended to qualify as tax-free for U.S. federal income tax purposes."

Dell  (DELL) - Get Report shares were up 8% after hours, while VMware  (VMW) - Get Report shares fluctuated but were up 2% overall. 

The potential restructuring was reported earlier, but had not yet been confirmed by either company. 

Dell said that it is continuing to explore strategic options in addition to the spinoff, including maintaining its stake in VMware. 

Dell initially accumulated shares in VMware by way of its 2016 acquisition of the storage hardware firm EMC.

VMware's total market capitalization is about $58 billion, and its stock has slipped 10% so far this year. It is considered a leader in virtual machinery for data centers and computer desktops, both technologies that help businesses to access disparate computer systems as a single network.

Earlier this year, Dell also announced plans to sell its RSA cybersecurity unit for $2.08 billion to a group that includes private-equity firm Symphony Technology Group, Ontario Teachers' Pension Plan Board and the PE firm Carlyle Group's AlpInvest Partners.

Shares of Dell are roughly flat year-to-date.