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Home >> Analysts See Dell's Privatization A Positive Step
ROUND ROCK, TEXAS — Michael Dell’s decision to take his company private will allow it to more closely focus on becoming a solutions-based, enterprise-focused company far away from the prying eyes of stockholders.
Last week Dell signed a definitive merger agreement that will have its founder, chairman and CEO Michael Dell purchase the company for about $24 billion. The deal, expected to close in Dell’s second fiscal quarter, was made in partnership with the technology investment firm Silver Lake. Published reports stated that Microsoft will finance $2 billion of the loan used to make the purchase.
Industry analysts consider the move a positive step for the now struggling, but one-time leading computer manufacturer. For the last several years Dell has struggled as it attempts to transition away from being a commodity PC dealer and expand its enterprise portfolio.
“Going private will allow Dell to more fully concentrate on moving continuing its transformation away from a transaction-based company towards a solution-based one without having to react to the misplaced demands that being public placed upon them,” said Stephen Baker, industry analysis VP at The NPD Group.
One of Dell’s more looming issues as a public company was Wall Street’s laser-like focus on its faltering PC business, said David Daoud, IDC’s research director.
“Ultimately, Dell will be looking at re-engineering itself into a company that offers solutions, software, hardware, etc., and PCs are a subset of that offering,” he said.
The shareholders concern over the PC side of Dell’s business is understandable. Using its innovative configure- to-order, direct-mail strategy, Dell was once the leading PC vendor in the world, but it has since fallen. IDC ranked Dell as the third-largest PC shipper for the fourth quarter in its preliminary report issued in early January, but its market share and shipment numbers are still declining precipitously.
IDC noted that Dell held a 10.6 percent share of the market on 9.5 million units shipped. This marked a 20.8 percent year-over-year decline in units shipped and a 1.9 percent fall in share.
Baker does not see Dell dropping its consumer PC business as it goes private.
“In these days where BYOD (bring your own device) and consumer and enterprise technologies are closely linked, we think that Dell isn’t likely to make drastic changes in its PC selling model since that connection to the consumer is vitally important,” Baker noted.
The analysts did not overlook the hazards involved in Dell’s latest journey. Carter Lusher, chief IT analyst at the research firm Ovum, said Dell corporate customers could cut back on orders in the short term as they check to see how the transition impacts Dell’s ability to meet their needs.
“There will be uncertainty as to what products and services stay, get strengthened, or get eliminated,” Lusher said.
IDC’s Daoud pointed out that Gateway also took itself private, but the move failed and the company was eventually acquired by Acer.
“But Dell today is not the Gateway of yesterday. It is a massive company with very strong relationships in the enterprise market and has very solid assets that need a much more cohesive strategy,” Daoud said.