Dell will invest in additional acquisitions and remain committed to its struggling PC business once a US$24.9 billion deal to go private is complete, according to company officials.
As a private company, Dell can also recapture the “entrepreneurial spirit” of its earlier days, founder and CEO Michael Dell said on a conference call Thursday. Dell led the buyout along with investment firm Silver Lake Partners. Shareholders approved the deal Thursday, marking a long-awaited victory for Michael Dell, who believes that by going private, the company can more effectively execute its strategy to push into high-margin products and services without pressure from Wall Street.
Michael Dell will hold a 75 percent stake in the private company, and the deal is expected to close in Dell’s current quarter, which ends Nov. 1.
Dell plans to make investments in research and development as well as acquisitions, grow its sales staff and partner programs, and expand its presence in emerging markets, Michael Dell said on the call.
It will also invest in its consumer PC and tablet business, he said. That affirmation comes after speculation that the company would spin off the PC division after going private.
“We will continue to make large investments in R&D in enterprise solutions and services,” added Chief Financial Officer Brian Gladden. “What we’ve seen is that part of the market is growing faster. By no means is that a statement of our lack of commitment to the PC business.”
It’s not clear whether the company will make significant cost cuts in order to pay for those investments. Asked about the possibility, Gladden was elusive with specifics. “I would say as always, we balance the need for productivity in our business,” he said.
It also remains to be seen to what extent Dell will report its financial results after going private.
“What you’ll see is really a focus on customers,” Gladden said. “We obviously value the relationships with the analyst community and the media [and want them] to understand the progress we’re making. I think we’ll continue to be proactive in communicating.”
What may not be in the cards are large-scale acquisitions. Dell has spent billions buying companies in just the past several quarters and “in many ways we’re digesting those,” Gladden said. “We will continue to make acquisitions where necessary but I suspect they’ll be more complementary.”
Dell’s planned strategy moving forward isn’t particularly unique in the broadest sense, with IBM, Hewlett-Packard and Oracle all offering customers combinations of enterprise software, hardware and services.
Nonetheless, Dell’s “strategy is differentiated,” Gladden said. “You think about what we’ve built over the last several years, it looks in many ways like competitors’ offerings but it’s based on scalable open technologies, faster time to value for customers, and we’re ultimately well-positioned with a large base of midmarket customers who value what we bring. That’s not to say we don’t scale up into large accounts. [But] we think we’re differentiated and we have a great chance to succeed here.”
Michael Dell didn’t take questions during the call. Afterward, in response to an email query about why he didn’t take questions, company spokesman David Frink replied: “Mr. Dell had a very full schedule today and moved on to another meeting.”
Changes to come
While Dell officials repeatedly affirmed the company’s commitment to the strategy it’s already laid out, expect some changes in coming months, said Forrester Research analyst David Johnson.
“Software is going to form a much more important part of Dell’s business in the future,” Johnson said. “Dell is in a position right now to be able to blend a really good hardware business with good enterprise traction with a growing software business, and build new types of converged systems.”
Dell’s focus in software will likely be in areas such as virtual computing and vertical applications for health care, Johnson added.
Other pursuits will likely center on high-end computing options and converged systems for running ERP (enterprise resource planning) and CRM (customer relationship management) software from the likes of SAP and Oracle, according to Johnson.
While possible, it would be risky for Dell to take the leap of actually buying a major business applications vendor, Johnson said.
“They don’t have the core expertise in running enterprise application software business,” he said. “You can’t just acquire that.”
Dell customers stand to gain if its strategy can click as a private company, according to Johnson.
“Any time you can choose a single vendor and a very well-integrated technology stack, it’s going to be more efficient,” he said.