Media Moves

Coverage: Dell returns to the public markets

July 3, 2018

Posted by Chris Roush

Dell Technologies Inc. has offered to buy shares that track its interest in software firm VMware Inc., a move that would mark a re-emergence into the public markets for Dell.

Michael de la Merced of The New York Times had the news:

The transaction represents in some ways the culmination of a nearly $100 billion bet by Mr. Dell and Silver Lake that, away from the harsh glare of public markets, they could retool a company best-known for making personal computers and traditional servers for an age of smartphones and cloud computing. Dell still supplies the machines that sit on the desks inside many office buildings, and has also found a ready market selling equipment and software to the kinds of networked computing services that were once thought to spell its end.

“In 2012, people were saying the PC was dead. It wasn’t,” Mr. Dell said in a telephone interview. “Three years ago, people were saying that everything’s going to the public cloud. Turns out that was completely wrong, too.”

It was an expensive wager, with Mr. Dell and Silver Lake spending roughly $25 billion to take Dell private, and then $67 billion to buy EMC — a transaction that created a kind of one-stop shop for hardware and software needed by companies to run their businesses.

Nico Grant and Giles Turner of Bloomberg News report that Michael Dell is a big winner in the deal:

Michael Dell’s stake in the newly public entity will be 47 percent to 54 percent fully diluted, the company said. He’ll also have considerable voting rights. Before going private in 2013, the founder had a personal stake of more than 15 percent — and he needed to win a majority of the voted shares excluding his own to favor the buyout. That gave activists like Icahn plenty of leverage over the transaction’s outcome.

Dell, long known for his love of deals, also will now have more bandwidth to pursue them. Rather than pay in cash — a precious resource needed to pay down debt — the company can employ share swaps as currency to acquire new businesses and teams. This will help it stay competitive with rivals Hewlett Packard Enterprise Co. and Nutanix Inc., which have been snapping up smaller companies to burnish their offerings.

“The company’s go-forward opportunities in the internet of things, the edge, artificial intelligence and connectivity are very profitable ones, buttressed especially by software and services from VMware, RSA, Secureworks and Pivotal,” said Patrick Moorhead, an analyst with Moor Insights & Strategy. “There are still good profit pools in storage, networking infrastructure and, going forward, machine learning.”

Umar Hassan of Computer Business Review wrote that the deal simplifies Dell’s corporate structure:

The move aims to simplify the tech giant’s tangled corporate structure without weighing on its balance sheet, and allow it to raise money on the markets for any future acquisitions.

“I am proud to lead this great company into its next chapter as we continue to evolve and grow to the benefit of our customers, partners, investors and team members,” said Michael Dell, Chairman and CEO.

He added: “Unprecedented data growth is fueling the digital era of IT, and we are uniquely positioned with our portfolio of technologies and services to enable the digital, IT, security and workforce transformations of our customers.”

Michael Dell, who currently owns 72 percent of the company, will continue to serve as Chairman and CEO.

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