DVMT
Dell Inc.
TMT, Event Driven/Special Sit
10/11/2016
Presented
| Date | 10/05/2016 |
| Price | 48.39 |
| Market Cap | $30.61B |
| Ent Value | $48.52B |
| P/E Ratio | N/A |
| Book Value | $5.10 |
| Div Yield | 0% |
| Shares O/S | 222.97M |
| Ave Daily Vol | 5,687,605 |
| Short Int | N/A |
Current
| Price | $125.83 |
| Market Cap | $32.44B |
| Dell Technologies Inc. provides a range of technology solutions worldwide. It offers client computing devices, including desktop personal computers, notebooks, and tablets; rack, blade, tower, and hyperscale servers for enterprise customers; value tower servers for small organizations, networks, and remote offices; networking solutions; and storage solutions, including storage area networks, network-attached and direct-attached storage, and backup systems. It also sells peripherals, including monitors, printers, projectors, and other client and enterprise peripherals, as well as third-party software products. In addition, the company offers support and extended warranty, enterprise installation, and configuration services; and infrastructure and security managed, cloud computing and infrastructure consulting, and security consulting and threat intelligence services. Further, it provides application services, such as application development, maintenance, migration, management, and consulting, as well as package implementation, testing and quality assurance functions, business intelligence and data warehouse solutions; business process services comprising back office administration, call center management, and other technical and administration services; and system and information management, and security software services. Additionally, the company offers financial services, including originating, collecting, and servicing customer receivables primarily related to the purchase of its products. It serves corporate businesses; educational institutions, government, healthcare, and law enforcement agencies; small and medium-sized businesses; and consumers directly, as well as through retailers, third-party solution providers, system integrators, and third-party resellers. The company was formerly known as Denali Holding Inc. and changed its name to Dell Technologies Inc. in August 2016. Dell Technologies Inc. was founded in 1984 and is headquartered in Round Rock, Texas. |
Publicly traded companies mentioned herein: Amazon.com Inc (AMZN), Dell Technologies Inc (DVMT), Alphabet Inc (GOOGL), Microsoft Corporation (MSFT), VMWare Inc (VMW)
Highlights
The presenter said he is long shares of DVMT, which is the tracking stock issued by Dell for the VMWare stake that came with the EMC deal. It is a way to express a bullish view on VMWare, and while he is usually “less interested in the security itself and more interested in actual business model”, in this situation there is an interesting opportunity to own a relatively unique security. First, the tracking stock is “almost certain” to attract institutional investors (as “the Malone complex” has). Second, the stock is trading at a meaningful discount to real VMW shares and has some bond-like characteristics – Dell’s credit risk is important to consider, and he cautioned that DVMT should not be too big a position because “if things go bad, it could theoretically escalate to very bad”. Overall, he felt compelled enough to establish a small position, and now he is debating whether or not to make it larger. Over the next 12-24 months, the discount should narrow from ~35% to VMW proper to a more “normal” tracking stock discount in the mid-teens. Plus, there is optionality around capital deployment. He explained the reasons for investing as follows:
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