Author Topic: VMW - VMWare  (Read 7899 times)

returnonmycapital

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Re: VMW - VMWare
« Reply #20 on: September 13, 2019, 10:00:21 AM »
Has anyone looked at arbitraging the DELL discount to VMW?

I don't think DELL is interested in selling VMW, they sell a lot of hardware to VMW customers. VMW is DELL's "get out of jail" card (a growing cash cow). Though they probably can't take it private as the VMW people like their VMW stock (options). 

I can see certain issues with a short VMW/long DELL position:

1) The odd special dividend paid out of VMW cash flow that will support its market price and the discount (but DELL can use that cash to pay down debt);
2) The consistent issuance of VMW stock (through option grants) diluting DELL's ownership over time and therefore reinforcing the discount; and
3) DELL's inferior balance sheet and, on a standalone basis, its operating metrics.

I wonder if that is worth $15 per share. 


Jurgis

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Re: VMW - VMWare
« Reply #21 on: December 01, 2019, 08:39:07 AM »
I'm wondering if VMW is on the cusp of extended business loss. I'd think that moves to public cloud and containerization will hit their business. If company moves all their compute to Azure, GCP, or AWS, how much business does VMWare get? Similarly if business starts using containers, does that significantly decrease the number of VMW licenses needed? VMW seems to be trying to counteract that with Pivotal acquisition, but I'm not sure that's gonna work out well.

Anyway, I've been thinking that a while. There's also Barron's article about this two weeks ago - can't find online link.

Disclosure: I sold most of my VMW position. But hey BRK should just buy VMW.
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indirect

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Re: VMW - VMWare
« Reply #22 on: December 01, 2019, 03:09:48 PM »
Hello Jurgis, read Barrons article and wondering would you go short VMW?

https://www.barrons.com/articles/vmware-stock-cloud-containers-kubernetes-51574459195

Jurgis

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Re: VMW - VMWare
« Reply #23 on: December 01, 2019, 05:52:37 PM »
Hello Jurgis, read Barrons article and wondering would you go short VMW?

https://www.barrons.com/articles/vmware-stock-cloud-containers-kubernetes-51574459195

I don't short.

Shorting VMW would be risky, since DELL could acquire the whole co.
"Before you can be rich, you must be poor." - Nef Anyo
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"American History X", "Milk", "The Insider", "Dirty Money", "LBJ"

scorpioncapital

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Re: VMW - VMWare
« Reply #24 on: December 02, 2019, 12:34:45 AM »
Another concern , will it be like an IBM which has been a value trap not because it doesn't spinoff a ton of free cash flow but mostly because revenues are shrinking a tiny bit each year. A melting ice cube tends to tread water on valuation - at best. At worst it just shrinks.