Dell Technologies stock climbed almost 20% on Wednesday as the company explores selling its 81% stake in VMware, as first reported by The Wall Street Journal. Dell’s stake in VMware is valued at about $50 billion.

Dell shares rose 18% in after-hours trading. VMware’s stock climbed by 8.4%.

Yes, we’ve been here before. In December 2018, after months of speculation and consideration of multiple financial engineering options, Michael Dell took his company public, buying out shares of VMware tracking stock.

And a lot has happened since then. In Dell’s short time as a public company (again), there’s been much business restructuring. Most recently, Dell agreed to offload RSA, its cybersecurity business, for more than $2 billion in cash. VMware (largely Dell owned) acquired Pivotal Software (also in the Dell-VMware family) last year. At the same time VMware announced the acquisition of cybersecurity vendor Carbon Black. And, there were significant organizational changes in Dell’s effort to simplify its go-to-market.

Dell’s Cheryl Cook

Highly visible since Dell went public is the tightly forged relationship between Dell and VMware. In fact, in a Channel Futures interview earlier this year, Cheryl Cook, senior vice president of global channel, talked not only about the big cross-sell opportunity within the Dell portfolio of servers, storage and client, but the even bigger payoff for partners who add VMware to the equation.

Partners who sell three lines of business with Dell and sell VMware generate 103 times more revenue than partners who only sell a single line of business, she said.

Why unload Dell’s crown jewel, VMware?

Bloomberg’s Brooke Sutherland

Bloomberg’s Brooke Sutherland suggests in an opinion piece that, “You only have to look at Dell’s own market value, which despite a rise of its own on the news of the possible spinoff amounted to only about $40 billion. Put another way, Dell isn’t getting full value for either the ownership of VMware or its own computing and data-storage business that took in around $80 billion of revenue in the most recent fiscal year. And, wants to remedy that.”

Needless to say, putting together a deal either for a spinoff of VMware or Dell buying out the remaining shares of VMware is complicated financially. And, to what benefit?

Viewpoint Research’s Cyndi Privett

“I wouldn’t think they would uncouple from VMware unless the alternative was dire,” Cyndi Privett, principal of Viewpoint Research told Channel Futures.

ESG’s Kevin Rhone

Kevin Rhone, senior strategic consultant and practice lead at Enterprise Strategy Group (ESG) agrees.

“Dell has a history of making shrewd, financially-driven moves – this is out on the horizon. But VMware is so valuable I don’t see them divesting unless it commands a serious premium.,” said Rhone. “As of today, they are both closer than ever, even while VMware tries to remain fiercely independent.”

How close?

Dell and VMware together support advanced customer initiatives covering hybrid/multicloud, security services, and app modernization/optimization. “For Dell partners, VMware software is an engine that is driving/pulling product sales along and allowing them to add more high-value services of their own. So, they love it when the combination clicks,” Rhone said.

More on just how tight Dell and VMware have become recently.

Techaisle’s Anurag Agrawal

“A majority of recent innovations and new product portfolio announcements — Unified Workspace, Dell Technologies Cloud Platform, VxRail, PC security — from Dell have been designed on the back of VMware technology,” said Anurag Agrawal, founder and chief global analyst at Techaisle. “To that extent Dell has hitched its success to VMware.”

Long View Systems’ Kent MacDonald

However, Kent MacDonald, senior vice president, strategic alliances at Long View Systems, a Dell and VMware partner, says there’s more to this than Dell/VMware synergies.

“Although there were some synergies in Dell/VMware current state that had upside for partners, the spinoff would allow VMware to be independent. And, it would allow for more collaboration with the broader IT community of hardware and software vendors,” MacDonald told Channel Partners. “In short, yes, a spin out would be positive for partners and customers.”

And, as partners know, Dell and VMware still run separate partner programs.

“However, remember that Dell and VMware’s partner programs now have a lot of…

… overlap – co-mingling, i.e., MDF accrued with Dell can be spent on VMware marketing and vice versa,” said Privett. “And, a lot of big partners buy their VMware licenses from Dell (Dell acts as a distributor for VMware) and VMware licenses count as tier credit in the Dell partner program.”

It’s messy

Techaisle’s Agrawal considers what a spinoff or buyout of VMware might look like.

“VMWare is building a security stack on Carbon Black whereas Dell has lacked comprehensive conviction in its own security offerings. VMware certainly would be more valuable than the sum of its own parts. If VMware is spun off completely with a clean break, it would be business as usual for VMware.”

Where does that leave Dell?

“Dell would come back full circle to being a systems organization and will cede its momentum to some competitors who are sitting on the sidelines looking for an opening,” said Agrawal. Yet, he adds, “Dell is a smart firm. It recognizes that its core strength lies in PCs, servers and storage, where it is continuing to innovate effectively and gain market share.”

“The prudent objective would be for Dell to fully acquire VMware. But that may be hard to pull off,” he said. And, that’s even given Michael Dell’s brilliant thought process for financial engineering.