back to article ‘Dead weight’ Dell would destroy VMware’s value, says big investor

Investment firm Jericho Capital Asset Management L.P has departed from its usual practice of not commenting publicly on deals by publishing a scathing letter addressed to VMware’s independent directors decrying a reverse merger between VMware and Dell. Jericho owns around 1.8 per cent of VMware, enough to make it a big …

  1. Anonymous Coward
    Anonymous Coward


    VMWare is pretty much a subsidiary of EMC, therefore it's a subsidiary of Dell Technologies anyway. If any acquisitions are on the road, I'd guess it would be Dell doing the buying, not VMWare.

    1. Piro Silver badge

      Re: Meh

      I think the idea was to turn the company public again by letting VMware buy it. I'm not really sure why they'd pursue this strategy, though, because Dell said being private allowed them much more flexibility and so on.

      1. Mike Pellatt

        Re: Meh

        I'm not really sure why they'd pursue this strategy (turning public again)

        Cashing in, (or rather, out) obvs.

        1. Michael Wojcik Silver badge

          Re: Meh

          Cashing in, (or rather, out) obvs.

          Well, yes. That's what private-equity firms do. They exist to make a profit, after all.

          That said, there is a business argument to be made. You start with a small private company, which is private because it's not big enough to go public. It grows and eventually goes public to leverage more capital, so it can grow further.

          Business cycles being what they are, many public companies eventually reach a crisis point. One response is to raise private capital and take the company private again, to - as Dell said at the time - gain flexibility. When you're no longer under the thumb of quarterly reports pushing your equity and bond prices around, you can engage in some longer-term restructuring. Of course there's no guarantee this will help, and we have many examples where it didn't, but for Dell it did, at least for a while.

          Then, eventually, in theory, you might get the now-private company back on a solid footing. And now you want to grow again, so you need more capital. More capital from equity would also let you pay down debt, such as that private capital from before, and remove the cost of servicing it.

          So you go public again.

          There are advantages to being private (less scrutiny, more internal control), and advantages to being public (cheaper capital for growth). Since it's a trade-off, it's not surprising if some businesses move back and forth between the two states.

          This is particularly true in tech where equity prices are highly distorted by speculation and less tied to fundamentals. One possible interpretation is that it's good to go public if you're big and stable enough to hedge against its effects; going public is essentially a higher-risk form of investing the company's future.

  2. Jay 2

    Silver Lake just want their pound of flesh and they don't give a toss about any collateral damage. Been there, done that. Not fun.

  3. Even Jelical

    The Blue Stack

    EMC+Dell+VMware = The Blue Stack.... bit like Oracle's "red stack"... remember that? Any construct like that turns customers into hostages....Nutanix must be rubbing their hands and the bloatmeisters wrestling match continues.....

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