Cisco Sells a Third of VMware Stake
@Cisco Systems disclosed Friday that in the fourth quarter it sold nearly a third of its overall stake in #cloud-infrastructure firm @VMware and detailed holdings in @Aquantia , which had its initial public offering in November. Networking giant Cisco (ticker: #CSCO) is a longtime holder of VMware ( #VMW). On March 31, 2011, Cisco owned 6.5 million VMware shares. A lot has happened since then. Dell Inc., which is privately held, bought EMC in a deal that closed in September 2016 and created the publicly traded @DellTechnologies ( #DVMT), a tracking stock for VMware. The acquisition was complex and included EMC’s subsidiaries, including 80%-owned VMware. Now that heavily indebted Dell Inc. is facing a crunch with the latest tax changes, it is considering options including an IPO or buying the roughly 20% of VMware it doesn’t already own. Cisco has been whittling down its stake in VMware. It stood at 4.3 million shares when the Dell-EMC deal closed, and had dwindled to 3.5 million shares by Sept. 30, 2017. In the last quarter of 2017, Cisco sold another million shares, bringing the ownership stake down to 2.5 million VMware shares. The latest sale drops Cisco to VMware’s 10th largest shareholder from sixth, according to S&P Capital IQ. VMware shares had a boffo 2017 with a 59% gain–nearly triple the 20% rise in the Standard & Poor’s 500 Index. But shares are down nearly 5% year-to-date through Monday midday trading. Perhaps Cisco should consider the Dell Technologies shares that track VMware. We’ve recently told our readers about the opportunity in the tracking stock. Cisco didn’t necessarily buy any shares of Aquantia (AQ), a maker of high-speed chips for Ethernet connectivity, in the fourth quarter. Cisco has been an Aquantia investor since the first round of investing in 2005. It hasn’t been a major investor, and disclosed an overall position of 673,000 Aquantia shares, about a 2% stake, at the end of 2017. Those shares could merely represent the conversion of pre-IPO preferred shares into common. Cisco may not have purchased common shares in the offering. Cisco may be kicking itself if it didn’t. Aquantia shares were priced at $9 and they have since gained 53% to trade at $13.78.