If there is one part of technology that still offers serious growth, it is cloud and virtualization. So with the news of EMC Corp. (NYSE: EMC) being acquired by Dell in the largest technology deal ever, including a VMware Inc. (NYSE: VMW) tracking stock, 24/7 Wall St. could not help but wonder how good — or how bad — this deal might be for VMware and its existing shareholders.

If you just look at the deal on the surface, VMware shareholders are reacting like they are being left high and dry. EMC’s supposed buyout price of $33.15 per share was generated by a buyout price of $24.05 per share in cash and 0.111 shares in a new tracking stock for the VMware unit, as it will remain a publicly traded entity. This even has a light implication for Cisco Systems Inc. (NASDAQ: CSCO).

For starters, EMC already owns the controlling stake in VMware, and it has a supermajority when it comes to the actual voting stake. That has many investors already having treated VMware as though it was a tracking stock. That historical view would also help to explain why VMware shares have been so volatile.

Standard & Poor’s placed EMC’s corporate credit ratings on CreditWatch with negative implications after the deal was announced. Fortunately, VMware itself carries no significant debt.

Mizuho has issued one report so far that downgraded VMware’s existing rating to Neutral. The firm also lowered its price target to $75 from $95 in prior calls. Mizuho noted that issuing a tracking stock will have roughly the same impact as if VMware were to increase its free float of shares. It has previously held a higher target due to the scarcity of VMware’s true float.

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On the fundamental side, Mizuho said that a closer proximity to Dell could potentially impact how vendors and customers view their relationship with VMware. The fear is that moving to a cloud vendor from an on-the-site software player could hurt at a time when bookings are soft.

FBR Capital markets went on to note that Dell could fund a portion of its already high debt burden in this deal by selling more VMware shares.

VMware shares were last seen down 11% at $70.00. It even hit a 52-week low of $69.75, versus a 52-week high of $93.43.

Now let’s consider one more issue on growth in technology. Dell is private, but being a personal computer maker is probably given zero growth ambitions by investors. We looked at the Thomson Reuters estimates to see projected growth rates:

• EMC revenues are projected to grow 3.4% to $25.3 billion in 2015 and projected to grow 4.6% to $26.4 billion in 2016.
• VMware revenues are projected to grow 10% to $6.65 billion in 2015 and currently are called on to grow 11% to $7.4 billion in 2016.

EMC shares were up less than 1% in midday trading Monday to $28.12. Needless to say, the sharp drop in VMware shares has put a blunting effect on the real value of the EMC deal — and the $33.15 per share buyout price now seems a lot like fiction rather than reality. That is even more puzzling when you consider that EMC even has a so-called go shop provision in the deal.

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As a reminder, Cisco is a shareholder in VMware. They won’t be looking at the VMware tie-up in dollar-terms on their investment as much as they might be concerned about what the tie-up might mean in relation to Dell now having the firm grasp over VMware rather than EMC holding that firm grasp.

The current view is that VMware holders now have to feel very snubbed here. They may even feel like they are being treated as second-class citizens, when they are really a prized asset with an enviable position. Some investors might wonder if they need to get securities lawyers involved with corporate governance violation points in hand for that so-called fiduciary duty.

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