Under Currents: A match made in Wall Street



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1 February 2013 | 0

At the time of writing this article there is a lot of buzz concerning the possibility of Dell becoming a private company. By the the time you read this, it may well have done so.

There are some people who view this as a good thing, arguing that a private Dell would be able to take more risks than it could as a public company. Some believe it will help Dell to speed up its bid to open up a clear distance from its PC roots as the vendor seeks to rebrand itself as a much broader entity. This fits neatly with CEO and founder Michael Dell’s pronouncement 12 months ago in February 2012 that the company had "transformed our business. We’re not really a PC company anymore. We’re an end-to-end IT solutions company".

The problem for Dell has been that whatever he might think the vendor has become, the wider world has been a bit slow to recognise it as something more than a PC company. And this despite a whole raft of acquisitions of companies that could not, by any stretch of the imagination, be described as PC businesses ranging from Perot Systems in 2009 to KACE NetWorks, 3PAR, SonicWall, Quest Software and Credant Technologies.

Now, if someone looking at that list isn’t inclined to give Dell the benefit of the doubt when he seeks to reposition the company as something more than a PC marker, you’d have to say think they were being pretty harsh. Howandever, it appears that, to date, not enough people in the industry and on Wall Street have been inclined to view Dell the company in the way that Dell the CEO would like them to.




Strange then that, for the most part, reaction to the possibility of the company going private has been so positive. You would think that the only reason why shareholders, analysts and Wall Street would support such a move would be because they believed it would make the company better. Alright, that’s not entirely right. It also gives them a chance to cash in their chips on Dell so it may well be they are happy to take the money and run because they don’t think Dell can ever be anything more than a PC company.

But let’s assume that there is broad support for the option of taking Dell private because it will make the company better. Even if there isn’t, we know that there are obviously people and investors willing to bet on precisely that outcome by stumping up the cash to buy the company out and take it private. Will it work? Who knows? Possibly. It’s definitely worth a try at any rate. I wouldn’t discount Michael Dell’s ability to reshape the business and turn it into an end-to-end solutions company.

The only thing I can’t understand is why people think it would be a good idea for Microsoft to become an investor in the private Dell company. I’ve seen one journalist quoted on techcentral.ie describing it as a "match made in heaven" and Rob Enderle, principal analyst at Enderle Group, argued the result would be "vastly more powerful than the Microsoft/Dell team that exists today" and tying a private Dell to Microsoft "would be a vastly more powerful combination than Google and Motorola".

The journalist in question, Onuora Amobi, editor of Windows8Update.com, claimed a Microsoft tie-up with Dell would give Microsoft reach and "instant credibility" as a device company.

Correct me if I’m wrong but I thought the whole point of taking Dell private was to try and move the company away from its PC roots, not bind it more closely to them. Now I know some people are going to say any Microsoft deal isn’t likely to be about PCs, it’s going to be focused on devices instead. I can see that might make sense because that’s an area where Dell hasn’t exactly covered itself in glory to date. Nevertheless, Dell does have tablets on the market and was probably planning to have more in the future.

Then there’s the difficulties this investment could create with Microsoft’s other OEM partners, something Enderle acknowledges when he states that Dell would "need to be firewalled from Microsoft to assure their relationships with other vendors, and convincing them this can and will be done won’t be easy". Aside from the obvious question (who knew firewall was a verb?) this does seem to be creating an unnecessary complication for Microsoft with its other OEM partners.

Aside from that, boosting Dell’s device making capability doesn’t seem to me to fit very neatly with all those acquisitions it has spent so much money on over the past three or four years. In fact, to me it looks more like a backward step. Or at least a sideways one. Then again, perhaps the reason for going private is, in the words of the Orange Juice song, to "rip it up and start again". If so, it seems like a fairly expensive way to go about it but maybe it’s the only way it can be done. Either way, it will be interesting to hear what term Michael Dell uses to describe the company once the deal has been done.

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