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2/5/2013
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Dell Goes Private: What's Next?

Dell is going private with the help of $2 billion from Microsoft. Going forward, how much will Microsoft influence operations?

In an email, Carter Lusher, chief IT analyst at Ovum, said that Dell's decision to step away from Wall Street scrutiny could forecast "radical changes to its strategy and product roadmap." Lusher said that Dell's chief challenge will be communication with prospects and customers, and suggested that CIOs assess the risk to their infrastructure if Dell's evolving business could change their procurement plans.

Forrester analyst David Johnson wrote in a blog post that he is "bullish" on the deal, and that he sees no immediate cause for concern among customers. Johnson said that acquisitions have made Dell organizationally complex. He expressed optimism that the company would streamline its IP around "a handful of solutions that no other vendor could provide," and lauded the decision to go private, noting that such streamlining would be a "massive undertaking" for a public company. John said he does not expect Dell to drop its PC business.

Microsoft's role as an investor has also been the subject of speculation. Some reports claimed that buyout negotiations emphasized Microsoft's influence within a private Dell, and many wondered if Microsoft was trying to mandate that Windows play a prominent role in future Dell products. Such a requirement has not been disclosed, and Michael Dell has stated that Microsoft won't be a part of day-to-day activities.

Even so, it remains to be seen whether other OEMs will take issue with Microsoft's investment. The software giant's relationship to PC makers is allegedly already strained by Windows 8's mediocre start and Microsoft's decision to enter the hardware space with its Surface line. Others, though, have theorized that Microsoft is more interested in Dell's cloud, big data and virtualization technologies than in the company's PC business.

In his blog post, Forrester's Johnson said Microsoft could see a number of benefits, noting that Dell offers supply-chain expertise, capacity for PC hardware and a chance to better optimize that hardware for Windows. He also noted converged infrastructures for cloud as an area of opportunity.

Constellation Research analyst Ray Wang said in an email that "Microsoft is Dell's biggest backer." In addition to investing in the buyout, Redmond has also supplied Dell with marketing dollars, Wang noted, saying, "We see them very aligned … in the long run."

"Microsoft can't lose another hardware partner and HP is shaky," he wrote, ostensibly in reference to HP's recent Chromebook experiment. "Dell needs to be there."

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sjacks982
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sjacks982,
User Rank: Apprentice
2/10/2013 | 7:28:19 AM
re: Dell Goes Private: What's Next?
Many of Dell's competitors (China, Japan, Korea; Lenovo, Samsung, [Apple]) work towards long term goals with ownership that understands that. Wall Street is a craps shoot with faddish financing trends and quarterly whims. Wall Street rewards losers like Dimon; then lowers Dell's prospects because the Server and PC are dead. Seagate went private when "storage will be dead" was the mantra: and storage is not dead and Seagate did better than public companies when stocks rollercoastered. Microsoft? Dell's recent purchases (except maybe Sonicwall) are all addons to MS products. Dell is the most common single brand in SMBs, a partner Microsoft doesn't want to lose. Besides MS has the cash and it will probably make money. Chrome? HP did well with WebOS, didn't it? HP doesn't need MS $$$ but an infusion of intelligence to their board. Lenovo is backed by the Communist Chinese government.
Andrew Hornback
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Andrew Hornback,
User Rank: Apprentice
2/6/2013 | 4:26:29 AM
re: Dell Goes Private: What's Next?
One would have to wonder if Microsoft teaming up with Dell is the two of them trying to build an organization to compete with the Oracle/Sun combination.

Given that the "big three" PC manufacturers are Dell, HP and Lenovo, this opportunity couldn't have come at a better time for Microsoft. HP's, by all accounts, an unglorified smoking mess internally and dealing with Lenovo would end up to some degree getting IBM involved (my assumption). By helping Dell go private again, Microsoft gets something in return - and given how much emphasis Dell is putting on their cloud services these days, I'm thinking that they're attempting to give their separate cloud platforms more gravitas.

Andrew Hornback
InformationWeek Contributor
jries921
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jries921,
User Rank: Ninja
2/5/2013 | 10:44:37 PM
re: Dell Goes Private: What's Next?
I'm sure MS is getting something for its money, but we'll just have to see what that is.
FritzNelson
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FritzNelson,
User Rank: Apprentice
2/5/2013 | 9:34:38 PM
re: Dell Goes Private: What's Next?
I'm not sure I see it as you do SMP. I think that Dell has made some fairly strategic moves, investing in a more diverse set of capabilities with IT in mind, especially at the SMB (small-to-medium business) level. Time will tell if those were smart decisions, but Dell would have been cooked if they had stood still, and arguably they've had some modest success in areas like storage and networking. I don't think the investment community appreciated these moves, and I think having to gauge and manage investor reaction can be a distraction, especially with so many new moving pieces, and complex new areas to conquer. Mind you, I'm not predicting success or failure, just suggesting that customer focus, rather than investor focus, will likely help fuel the success side of that equation.
SMP
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SMP,
User Rank: Apprentice
2/5/2013 | 9:10:59 PM
re: Dell Goes Private: What's Next?
Hmmm.... looks like Dell is the next Nokia - and look what happened to Nokia when they took Microsoft's $1 billion per year and started running Nokia for the benefit of Microsoft rather than the benefit of Nokia.
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