Morgan Stanley analyst Keith Weiss said he believes the likely objective of Dell’s strategic evaluation is to maximize enterprise value, not minimize leverage.

With that in mind, he thinks a reverse merger with VMWare (VMW), which risks significant value destruction, seems unlikely. Weiss sees Dell’s most likely path forward as continuing to use its operating cash flow, along with asset sales and potentially a dividend from VMWare, to fund repurchases of the Dell Technologies (DVMT) tracking stock, he tells investors. If the risk of a reverse merger lessens, he sees VMWare “quickly” returning toward his unchanged $143 price target, Weiss added.

He maintains an Overweight rating on VMWare, citing his positive view of the company’s strengthening fundamentals
 

Print Friendly, PDF & Email