Partners undaunted by Dell's return to the stock market

UK partners unworried about tech giant's return to the stock market, but query whether now is the right time to go public

Nearly a year after reports emerged that Dell Technologies was considering going public once again, Michael Dell's wish was granted and the firm he founded returned to the stock exchange on 28 December.

It was a bumpy road after the founder confirmed the rumours in February, with pushback from investors of Dell and VMware - of which Dell owns around 80 per cent - not least from Michael Dell nemesis Carl Icahn.

For a while even Dell itself didn't know what it wanted, with various convoluted ways of going public, including a reverse merger with VMware, touted as options.

But, as is often the case, Michael Dell got what he wanted when a complex deal involving a VMware tracking stock was agreed by shareholders, handing him an early Christmas present.

"Our world is undergoing a digital transformation that will change every aspect of how we live, work and operate as a society," he announced when his company joined the New York Stock Exchange under the "DELL" tag.

"Dell Technologies was created to be the essential infrastructure company for this digital era, and with today's announcement, we are aligning the interests of our stakeholders to benefit from the integrated innovations and value creation from across our entire family of businesses."

Partner reaction

Dell is not new to public life, having traded on the Nasdaq stock exchange from 1988 until Michael Dell and Silver Lake took it private in 2013 in a $24.4bn management buyout.

Matthew Ball, analyst at Canalys, said the move now puts Dell on a level playing field with its main competitors, which are all publicly owned.

"As a private company it has been able to invest in the long term without the restrictions of quarterly reporting," Ball said.

"But now as it shifts to a public company it has to change focus and that may mean having to make more short-term investment decisions.

"It will have to operate differently and be more accountable to investors. All its main competitors are also public and it will now be playing on the same level as those whether that is in storage, servers or PCs."

There is often a sense of uncertainty when a vendor changes ownership structure - particularly for partners that have invested heavily in training and certifications.

But in this case partners are relatively unfazed, as many have already accompanied Dell on its earlier journey to private ownership.

Cliff Fox, COO at Pure Technology Group, told CRN that he does not expect any huge differences in how the company operates or deals with partners.

"We were partners with them when they went private in 2013," he said. "It probably wasn't as strong and essential a relationship as it is now, but that initial transition didn't affect us in any way."

Des Lekerman, CEO of TIG, does not expect to see any changes in how Dell interacts with its partners, but voiced concerns about the timing of the IPO.

"Obviously more compliancy, controls and reporting have to be in place for the stock market - having external shareholders is a different mode of operation," he said.

"But is it a good time to be listed, with the market down at the moment? I'm not sure it is."

When news emerged that the company was considering an IPO, Bloomberg reported that the company had a "massive debt load" of about $46bn (£36.5bn) from its gargantuan acquisition of storage
giant EMC for $67bn in 2016, as well as its majority stake in VMware.

Lekerman speculated that this debt burden pushed Dell to restructure its ownership model, but he had expected it to remain private.

"It's a huge business and probably too big to remain private on its own," he stated.

"Silver Lake probably wanted to get some money back from its investment and going public is a way of doing that, but I would have thought another PE firm would have bought in."

In the dark

Dell's plan to float on the NYSE by buying back shares of DVMT, which is a tracking stock linked to its VMware subsidiary, was nearly scuppered in November by activist investor Carl Icahn, who owned a 9.3 per cent stake in the stock.

Icahn claimed that the vendor had "refused to provide much basic information" in relation to its plans to go public and that it wasn't paying a fair price for the stock. An improved offer won around shareholders and Dell was granted approval for its flotation on the New York stock exchange in December.

The lack of communication at the top seemed apparent among the vendor's partner community too, as those who spoke to CRN agreed that no real contact had been made with them regarding Dell's restructuring, though many seemed unconcerned about this lack of communication.

Jonathan Lassman, MD of Epaton, laughed off any concerns about Dell's recent IPO.

"The fact that money changes hands at the top of the business doesn't affect the way the firm operates," he said.

"I haven't seen any communication from them, but I think it was public before, then it was private and now it is public again - and probably on more favourable terms than it was last time."

Fox agreed with this, adding that though Pure Technology met with Dell senior management last year, though in-depth analysis of the IPO was not discussed.

"Our performance with Dell has gone from strength to strength," he claimed.

"I think the relationship between us is good enough that we trust them and they've managed these transitions pretty well before."