Both will use spinoffs to cut their debt

Article Excerpt

These two firms are planning spinoffs to pay down their high debt. However, their remaining businesses will likely still carry heavy debt loads. DELL TECHNOLOGIES INC. $67 is a hold. The company (Nasdaq symbol DELL; Manufacturing sector; Shares outstanding: 746.7 million; Market cap: $50.0 billion; No dividend paid; Takeover Target Rating: Low; www.delltechnologies.com) is a leading maker of computers, monitors and related equipment for consumers and businesses. The company is now considering spinning off its 80.1% stake in VMWARE INC. $145, which is also a hold. This firm (New York symbol VMW; Manufacturing sector; Shares outstanding: 420.1 million; Market cap: $60.9 billion; No dividend paid; Takeover Target Rating: Low; www.vmware.com) specializes in virtualization and cloud-computing software and services. Virtualization lets a company separate its computer operating system and program software from its underlying hardware. Dell would likely structure the transaction so that VMWare pays it a significant dividend. That would let Dell pay down its long-term debt of $43.6 billion (as of July 31, 2020)—a high 87% of its market cap. However,…