The EMC-Dell Merger: The Basics of VMware

VMware (VMW) provides virtualization infrastructure solutions, which helps companies manage the way they build and deploy information systems technology. VMware has three basic service and product offerings: SDDC (Software-Defined Data Center), hybrid cloud computing, and end-user computing.

VMware’s SDDC offerings help companies build and manage a cloud-based infrastructure in which the services are increasingly automated. The SDCC architecture consists of four main categories: Compute, Storage and Availability, Network and Security, and Management and Automation.

The hybrid cloud computing segment consists of VMware’s vCloud businesses. One of them, vCloud Air, is a public cloud that includes infrastructure, disaster recovery, and various other applications. Their other offerings in this category are directed toward other cloud-based vendors and telecommunications companies.

VMware’s end-user computing strategy helps IT companies efficiently provide end users with more secure access to data, applications, and devices and the ability to keep up in the mobile-cloud era.

VMware was incorporated in 1998. EMC (EMC) bought the company in 2004 and still has a controlling interest. As part of the EMC-Dell merger, a new class of tracking stock will be issued to EMC shareholders that will track the performance of EMC’s VMware holding. The tracking stock won’t have a vote nor will it represent any ownership interest in VMware. So it will undoubtedly trade at a discount to VMware shares that will continue to trade after the merger is completed.

Other important merger spreads include the deal between Baker Hughes (BHI) and Halliburton (HAL) and the merger of Freescale Semiconductor (FSL) and NXP Semiconductors (NXPI). For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.

Investors who are interested in trading in the technology sector should look at the Technology Select Sector SPDR ETF (XLK).