Michael Dell is set to finally win back control of the company he founded from the whims of shareholders by making it privately owned once more, a move that will allow Dell to be bolder in restructuring the firm to match the changing IT landscape and also allowing it to proceed without having to disclose too much of its strategy, according to industry observers.
Dell announced on Thursday that shareholders have voted to approve the proposal which will see Michael Dell acquire ownership of the company in partnership with investment firm Silver Lake Partners.
The deal, expected to close before the end of Dell's third quarter for the financial year 2014 which falls at the start of November, has not been without controversy. The buyout was fiercely opposed by some Dell investors, led by billionaire Carl Icahn, who dropped his opposing plans for the Dell proposals earlier this week.
But now the buyout looks set to go ahead, it clears the way for Michael Dell to take more risks and move with greater haste than shareholders may have allowed, according to some analysts.
"Dell believes that it will have more flexibility to make the changes it wants to the organisation and to more rapidly execute its strategy as a privately held organisation," Gartner research director Adrian O'Connell told V3.
The reasons for this revolve around what O'Connell refers to as "old Dell", namely the traditional PC manufacturing operation. This is an industry segment that has been in the doldrums for some time, hit by falling sales as companies feel less need to refresh their hardware so frequently or are adopting newer technologies such as tablets to serve some client computing needs.
In contrast, Dell's enterprise solutions division has been prospering as the company moves to turn itself into a one-stop shop capable of meeting all the IT needs of large corporate customers, and has seen it expand its servers, storage, networking and IT services investments over the past few years.
However, there are potential pitfalls, according to O'Connell, including market perception.
"The issue is whether enough customers and prospects really understand the capabilities of the ‘new Dell' and whether they really trust the company as a supplier at the heart of their data centres," he said.
According to David Johnson, Forrester principal analyst for infrastructure and operations, one thing the new Dell will need to focus on is expanding its software capabilities.
"Software will increasingly be the heart of our business technology world through 2020 and beyond, and Dell is only at the beginning of its journey into software under John Swainson," he told V3.
"We believe that converged systems of hardware and software will form the core of Dell's future strategy. This will in turn drive the services strategy, not the other way around, but it will take substantial and sustained investment to pull off."
Swainson, a former CA chief executive and IBM veteran, was hired by Dell to head up its fledgling software division last year.
Johnson said that he believed the private equity move is the right one for Dell, and will allow it to make the critical changes to the company that are needed.
"With public funding, there is intense scrutiny from the investor community around quarterly results and the ongoing revenue and cash flow from acquisitions. Under private equity, these problems are eased and investments can be made with more leadership discretion," he explained.
The message seems to be that we can expect to see big changes from Dell in the near future, as Michael Dell attempts to forge it into a more agile operation with a greater focus on enterprise infrastructure, services and software, and much less on its roots in the PC sector. If he can pull it off, that is.
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