Private eyes
Now Dell has gone private again, what does the future hold for the firm and its partners?
The pace of transformation at Dell will only accelerate now the vendor has completed what represents the largest public-to-private buyout in corporate history.
That was the message of its eponymous founder Michael Dell as he laid out his vision for the next chapter of Dell's history to customers and partners assembled at its Technology Camp in Paris last month.
The Texan PC baron finally won his nine-month tussle for control of the firm he founded in 1984 on 12 October when his buyout proposal, which was backed by private equity giant Silver Lake, received shareholder approval. The deal had just closed as CRN went to press.
Dell said his desire to delist was sparked when investors began to drag on his ambitions to plough on with an M&A strategy designed to transform Dell into an end-to-end solution provider.
The new capital structure will enable Dell to invest in five key areas of the business (see below), a strategy he said would have been curtailed if the firm had remained bound to the short-term planning cycles of the stock market.
"In the US, and probably other places around the world, there is an affliction of short-term thinking," he said.
"Certainly, if you look at the political environment in the US, [that] can be seen in a pretty bright light. Public companies are subjected to 80- to 90-day planning cycles where they are constantly having to adjust their plans based on market expectations.
"[Now] we get to wake up every day and say, ‘what do we do if we own the whole company'? "What we care about is three, five, 10 years from now."
Dell's stock appreciated 13,500 per cent during its 25 years on NASDAQ but Michael Dell said the firm no longer needed the capital or brand recognition that comes with being a listed company. Dell generated more than $4bn (￡2.5bn) in free cashflow in the past 12 months, he emphasised.
"We are very fortunate to be able to operate as a private company with a much longer-time horizon and the ability to be as aggressive as we want to be," he said.
"We have all the capital we need. If we wish to make large additional acquisitions, our two equity investors can contribute extra investment."
While Dell is not abandoning its roots in PCs, the emphasis will be on its ability to offer an end-to-end solution in the datacentre, which will be reflected through a new marketing campaign run hand in hand with its 130,000-strong global partner community.
Partner marketing collateral and demand generation activities will now centre on how Dell can solve four distinct business problems, rather than on individual products, revealed Bob Skelley, Dell's executive director of global certified partner programme and channel. These are: accelerating application performance; optimising IT; connected security; and enhancing end-user productivity.
"We are bringing out marketing to the channel community in a different way," Skelley explained. "So rather than marketing storage, servers or networking, it will be around marketing to business problems and we will help our channel fulfil those business problems by giving them the tools and resources they need."
The size of Dell's enterprise business has more than doubled to $21bn over the past five years, Dell said, adding that the plan is to double that figure again.
Channelling success
Dell's new software arm will be another focus area, following a quick-fire acquisition spree that has taken in the likes of SonicWall, Quest and Boomi. Dell Software is now a top 20 global software company by revenue, with 1,400 partners having passed the new security, data protection, information management and systems management competencies since they were added to Dell's PartnerDirect scheme on 3 September.
"Channel will be a huge part of what we do in software," declared Marvin Blough, executive director of worldwide channels and alliances for Dell Software.
Spending on research and development will also rise, Dell promised, with the vendor continuing to invest in converged infrastructure as virtualisation and software-defined architecture blur the lines between storage, networking and servers.
"We are seeing products such as our Power Edge VRTX that completely eliminate the lines and bring converged infrastructure into an affordable platform," said Dell. "We are changing the game in the datacentre."
Dell concluded: "This is the largest firm in the world in revenue terms to go from a private company, so we are very excited. I'm thrilled to have had the shareholder vote and to be coming to you now as once again a family-owned company."
Greg Davis, Dell's vice president of global commercial channels, predicted that Dell's ownership change would resonate with partners.
"Most of them are privately held companies themselves, so they all have the same entrepreneurial spirit and drive that Michael has," he told CRN. "Most love the idea and can't wait for it to be completed."
Martin Hellawell, chairman of Dell partner Softcat, said Dell's ownership change "makes perfect sense" for the firm but doubted it would affect partners. "Dell has been moving to channel for five years. Do I expect to see a major ramp-up now? No. But it will enable them to continue on the same track."
However, Michael Keegan, UK executive director at rival vendor Fujitsu, was not so charitable, arguing that the ownership change will see Dell become a "slave" to its bondholders, who he claimed are only interested in generating profit and enough cash to service the debt it has now taken onto its balance sheet.
"Dell could become the next zombie company," he said. "This means if Dell should fail to produce enough profit to service its large debts for any reason, there is a very real chance that its bondholders could step in and change its direction for it, break it up or even sell it off without much notice - leaving partners and customers in the lurch."
Where will a private Dell inject its cash?
■ END-TO-END SOLUTIONS
Starting with its 2007 acquisition of EqualLogic, Dell has been on a datacentre crusade for the past six years as it moves beyond its PC roots. Michael Dell promised there would be more of the same in the Silver Lake era, stressing that Dell's R&D in the last quarter rose 25 per cent. "We filed more patents this year than last year. We are absolutely building for the long term - [in software, services, enterprise and datacentre]."
■ INTERNAL SYSTEMS
Dell wants to become easier to do business with, and will up investments in its own systems accordingly, Dell said.
■ EMERGING MARKETS
Dell's next billion users will come from the developing world, Michael Dell said, while the vendor is also keen to expand its global reach to support customers as they expand internationally.
■ SALES COVERAGE AND CHANNEL
Since launching PartnerDirect in 2007, Dell's partner business has grown to 35 per cent of its commercial revenue. Dell said the plan is to "grow that even more considerably", while also beefing up internal sales to go after the 100 to 5,000-seat market.
■ CLIENT COMPUTING
"While there have been many stories written about the death of the PC, I think the PC is not dead," Michael Dell said, stressing his firm's commitment to the client market that catapulted his brand to prominence. He highlighted the new M3800 Precision mobile workstation as an example of Dell's efforts to innovate in the market.
Michael Dell on...
His commitment to PCs
"We are absolutely investing in our client business... This was one of the things that got misreported in the news during all the misinformation about Dell going private. There were a lot of incorrect stories but it was a period when I was unable - for legal reasons - to say very much."
Going private
"Many investors didn't agree with [the M&A strategy], so I bought the company back from the shareholders. It turned out to be a little harder than I expected, but I got it done."
Windows 8.1
"We don't really see large-scale adoption of Windows 8 but there is no Windows cycle in the past 20 years where corporations immediately adopted, so we are where we expect to be from a corporate standpoint. We think Windows RT was a mistake... Windows 8.1 looks to us to be a lot stronger."
HP and IBM
"In the last quarter, our enterprise business grew nine per cent. One of our two-letter competitors had growth of negative nine per cent and a three-letter competitor reported x86 server business down 18 per cent last quarter. So we believe we are gaining share across the enterprise and datacentre and will continue to do that."