Channel observers are reacting largely positively to news Tuesday that Dell Inc. (NASDAQ: DELL) has signed an agreement that will see founder and CEO Michael Dell lead a group that will take the company private.
Dell, along with investment firm Silver Lake Partners, will offer Dell stockholders US$13.65 in cash for each share of Dell stock, which represents a premium of 25 per cent over where the stock was trading before rumours of a buyout emerged. The deal, worth an estimated US$24.4 billion, is subject to several conditions and regulatory approvals. Microsoft Corp. is a participant in the investment group, providing what Dell described as US$2 billion “loan.”
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The deal to take Dell private surprised one the more successful Dell channel partners in Canada.
Tyson Choptain, executive vice president of Broadview Networks, a Winnipeg, Man.-based IT consulting and solution provider specializing in virtualization, security, enterprise storage and disaster recovery, told CDN that his company was surprised at the deal itself and the time of the deal.
However, Choptain says he’s “tentatively excited about it.”
“I want to see more synergy with the products Dell has acquired recently.”
He added that Dell did a great job integrating the EqualLogic and Compellant acquisitions from a sales perspective and overall his company’s working relationship with Dell has worked out very well for Broadview Networks.
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From his point of view, Choptain thinks Dell going private is rooted in all of the acquisitions the company has done ever since they embraced the channel back in 2007. “Dell has bought a lot of companies and they need to put in more R&D money into those acquisitions and they’ve had a tough time doing it. But by going private they would no longer have the scrutiny of shareholders to deal with,” Choptain said.
That same advantage was noted by James Alexander, senior vice-president with the London, Ont.-based Info-Tech Research Group. Dell will now be able to develop and execute a strategy to deal with key trends such as bring your own device (BYOD) and the consumerization of IT in private, without the prying eyes of their competitors looking over their shoulders via the mandatory disclosure required of public companies.
“As they begin to execute this strategy where everyone seems to be trying to find the high ground in terms of the product mix they sell in a commoditized world, it allows them to do things more privately,” said Alexander. “This allows Dell to hunker down and figure out their strategy without having everyone else knowing what the strategy is, and partners of all types coming and second-guessing.”
For Dell’s competitors, it means losing visibility into Dell’s financials and sales mix that is required to be disclosed by public companies. As a private company, Dell can keep that information confidential, while still prying into the affairs of its public competitors, such as Hewlett-Packard Co.
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For Dell’s channel partners, Alexander said there’s no reason that Dell going private should have any impact on their relationship with the vendor. The change is primarily for Dell, which will no longer have to employ a “small army” of compliance and investor relations professionals.
Choptain is hoping Dell won’t lose sight of the PC business. Choptain said that Dell has done a great job of broadening the product line for the data centre and that has help Broadview Networks increase its business in their market, but he does not want Dell to exit the PC business the same way IBM did so many years ago.
“I want to provide as many types of services to customers as possible given our scope of knowledge and expertise we have. I do not understand why IBM had to get out of PCs. And, HP talking about getting out of hardware, I did not understand that. Dell pulling back from PCs, I hope they do not go too far there. I realize PCs are not a high profit business, but there is some stickiness to the product because people sit in front of them,” Choptain said.
As for Microsoft’s involvement, Alexander said calling it a loan as opposed to an investment may allow Microsoft to claim a more neutral position when pressed by its other vendor partners. Still, while the vendors will put on a brave public face, Alexander believes it “does seem in some way, shape or form” that it tilts the playing field.
