Dell says could buy back at least $3 billion in VMware tracking stock

Dell Inc said in a filing on Monday that it has the flexibility to buy back at least $3 billion in VMWare Inc tracking stock, the special class of shares the computer maker plans to issue to help finance its acquisition of EMC Corp.

The disclosure could prove important as Dell seeks ways to boost the value of VMware, a virtualization software maker majority-owned by EMC. The plans to issue a tracking stock have weighed on VMware`s common shares, which have lost a quarter of their value since the acquisition of EMC was announced in October.

Under the terms of the deal, EMC shareholders will receive 0.111 VMware tracking share for each EMC share, a move intended to give investors exposure to VMware, which is growing faster than EMC.

Dell said in a registration statement Monday that Dell "intends to consider opportunities to repurchase shares."

Dell said it could support up to $3 billion in share repurchases and other types of payments and that the amount may increase over time, depending on its net income.

Dell said its goal will be to reduce its debt load in the first 18 to 24 months to achieve an investment-grade rating. Dell will have $49.5 billion in debt under current plans to finance the EMC deal.

Since Dell was taken private in 2013, it has reduced its debt by $4.5 billion, including $2.5 billion paid off by Dell itself. In addition, Denali Holdings, the holding company owned by private equity firm Silver Lake Partners and Michael Dell that controls Dell, paid off a $2 billion loan from Microsoft Corp.

Dell spokesman David Frank said in an interview that Dell will be focused on paying down debt and not buying back VMware tracking shares after the merger.

"It basically gives management flexibility, but the use of cash is largely going to be used to run the business and delever the company," Frank said.