US computer maker Dell Technologies and business software provider VMware have decided to explore options that could include a potential merger of the two companies, people familiar with the matter said on Thursday.

The move, which may not result in any deal, comes as Dell, the world’s largest privately held technology company, seeks new avenues for growth following its debt-laden acquisition of data storage provider EMC for $67 billion in 2016 (roughly Rs. 4.29 lakh crores).

Dell plans to announce as early as Friday that it will review a possible reverse merger with VMware, as well as other alternatives, including an initial public offering or asset divestitures, the three sources said.

VMware plans to announce that it will form a special committee of board directors to consider a combination with Dell, according to the sources. VMware is 80 percent-owned by Dell, so the special committee is aimed at making any combination subject to approval by disinterested directors who will safeguard the interests of VMware minority shareholders, the sources added.

The sources asked not to be identified because the matter is confidential. Dell declined to comment, while VMWare did not immediately respond to a request for comment.

Dell is under pressure to boost its profitability after the EMC deal failed to deliver the cost savings and performance it projected, while higher component costs and a challenging data storage market have eroded its margins.

The Round Rock, Texas-based company has struggled with fierce competition in the storage market, as cloud-based rivals such as‘s AWS and Microsoft‘s Azure put pressure on prices. Dell’s infrastructure chief, former EMC executive David Goulden, departed last fall, and the firm has since been working to reorganize its storage operations.

The PC market, which Dell CEO Michael Dell helped shape by founding Dell in 1984 as a college freshman with $1,000 (roughly Rs. 64,000) in savings, has remained stagnant due to the popularity of smartphones and tablets, shrinking by 0.2 percent in 2017, according to International Data Corporation.

A reverse merger would see Dell buying VMware, which has a market capitalization of $51 billion (roughly Rs. 3.27 lakh crores), rather than Dell buying the minority stake in VMware it does not already own. A lockup provision prevents Dell from buying out VMware until September.

Another consideration for Dell in its deliberations is offering an eventual path to private equity firm Silver Lake to cash out on its investment in the company. Silver Lake helped bankroll Michael Dell’s $24.9 billion (roughly Rs. 1.59 lakh crores) deal in 2013 to take the company private and owns about 18 percent of the company.

© Thomson Reuters 2018

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