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Why the Dell rumors might have substance

Why the Dell rumors might have substance
From TechCrunch - January 29, 2018

By now youve probably heard that the Dell board is supposed to be convening later this month to figure out how it might reorganize itself to deal with the mountain of debt it took on when it bought EMC in 2015 for $67 billion.

The rumors began on Friday and involved a couple of possible scenarios including Dell going public or Dell buying the remainder of VMware (which Im not sure solves the debt problem). Today CNBC reported a third option, that the company could be considering a reverse merger where VMware buys Dell.

For what its worth, I contacted Dell on Friday and was told, as you would expect, that Dell doesnt respond to rumors, but one industry insider I contacted did say, the company is actually considering all options, but hasnt decided anything yet.

The company still reportedly has $46 billion in debt left over from the EMC merger, and as Bloombergs Kiel Porter pointed out that amounts to $2 billion in interest payments. Under the new tax law, they will need to pay substantially more because they lose part of the interest write-off. The interest figure looming in the future is probably what is precipitating this discussion by the Dell board now.

All of this sounds to me like finding some clever bookkeeping games to shuffle some of that debt around, but Jack Gold, principal at Gold and Associates, said on Twitter, it could be a case of Dell trying to take advantage of the new tax laws, the overheated stock market or some combination of the two.

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