Michael Dell primes channel for growth following takeover

Dell founder outlines five key investment priorities for his firm as it gets set to return to private ownership

Michael Dell has pinpointed the channel as one of five key areas of investment for Dell as he gears up to take the firm off the stock market.

Addressing customers and partners at the Dell Technology Camp in Paris today, Dell said his ambitions for the firm he founded from his college dorm room in 1984 would have been diluted if it had remained as a public company bent to the short-term whims of shareholders.

Dell finally received shareholder clearance for its $24.4bn (£15bn) leveraged buyout on 12 October and the deal is set to close next month.

Returning to private ownership after 25 years will allow Dell to boost investment in five key areas, Dell said.

This includes expanding its sales coverage and relationships with partners, whom Dell said now contribute 35 per cent towards its commercial revenue nearly seven years after it formally entered the channel.

"We believe we can grow that even more considerably," he said.

Accelerating its strategy around building out end-to-end solutions, increasing coverage of emerging markets, investing in growing its client business and pumping more money into improving its internal systems form the other four core areas.

"All these are things that, as a public company, are harder to do, as you are balancing the short term with the long term, with maybe an emphasis on the short term because of the demands of these short-term-minded investors," he explained.

M&A agenda

Shielding the firm from the prying eyes of the stock market will expand Dell's "time horizon" by allowing it to plan three, five or even 10 years ahead, compared with the typical 80 or 90-day planning cycles that hamstring public companies, he said.

A string of software, security, storage and networking acquisitions has enabled Dell to more than double the size of its enterprise business to $21bn over the past five years but Dell admitted not all shareholders were happy with the strategy.

"Many investors didn't agree with that, 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," he deadpanned, in reference to his bitter tussle with activist investor Carl Icahn.

Dell has acquired more than 15 companies since 2010 and its eponymous leader said the new financial structure of the firm – with both Silver Lake and Dell himself able to put in additional equity – lends itself to more acquisitions, possibly big ones.

Dell floated his firm in 1988 to raise capital and brand awareness, needs that he said are both now sated.

"During the 25 years that Dell was a public company, our stock appreciated by over 13,500 per cent. Yes, we are proud of our record but today we don't need either of those things anymore," he said.

"In the past 12 months, the company generated more than $4bn of free cashflow so the capital structure we have is now much more favourable than the one we had as a private company. And of course, now that Dell is one of the most recognised brands in the world, we don't have a problem being known by our customers. So 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.

"We have all the capital we need. If we wish to make large additional acquisitions, our two equity investors can contribute extra investment."

"This is actually the largest company in the world in revenue terms to go from a private company, so we are very excited," he concluded.

Greg Davis, Dell's vice president of global commercial channels, predicted that Dell's ownership change would gel well 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."