Partners Say Dell Being Privately Held Has Paid Big Dividends For The Channel

Solution providers are hoping that Dell founder and CEO Michael Dell will stay the course and keep the company privately held following reports Friday that the company is eyeing a return to the public market with an initial public offering.

Frank Vitagliano, CEO of Houston-based Computex Technology Solutions, No. 121 on the 2017 CRN Solution Provider 500, said Dell has gained significant competitive advantages from going private and is unlikely to want to give up those benefits with a full initial public offering.

"The reason for taking Dell private made a lot of sense then and it still makes a lot of sense today," he said. "By going private, Michael no longer has to worry about the 90-day shot clock and is able to do longer-term planning. That has been a big competitive advantage for Dell and its channel partners."

[Related: Report: Dell Considering IPO, Buying Rest Of VMware]

Vitagliano said public companies far too often make "unnatural" channel moves that compromise partners. "By going private Dell can take a longer-term view," he said. "For partners, that means you don't see dumb things like stuffing the channel. I have seen that in this industry for 30 years. I think the model Dell has today works and I would be surprised if they decided to opt for a complete IPO at this point."

Dell's board of directors is scheduled to meet later this month to discuss the options in an effort to raise cash and increase sales, according to a Bloomberg news report.

Michael Tanenhaus, CEO of Mavenspire, an Annapolis, Md.-based solution provider and Dell EMC channel partner, said it's "highly unlikely" that Dell would be exploring going private.

"From an IPO point of view, they're ahead on their debt payments, so I don’t think that's going to push them. Michael Dell hated being public a lot and didn’t realize it until he was private. That's strictly from his own public comments in that he saves a ton of time every day being private," said Tanenhaus.

Tanenhaus said Dell could be forced into filing an IPO, but he doesn't see any evidence of that happening.

"It's still a very transformational time for IT. So I think going public, where you have to reveal your transformation plans, would kind of be the antithesis of what he was trying to accomplish in the first place. So I can't imagine that being on the table," Tanenhaus said.

The move to consider strategic alternatives like an IPO comes five years after Michael Dell completed the largest private equity buyout in history, taking Dell private in a $25 billion deal.

Other alternatives that Dell is considering, according to Bloomberg are buying the rest of VMware and a public offering of its Pivotal Software Inc. cloud computing venture, according to Bloomberg. Dell met with bankers last year to discuss a potential Pivotal IPO and was told the company was valued at $5 billion to $7 billion, according to Bloomberg.

The decision to look at strategic options comes just 16 months after Dell completed its blockbuster $67 billion acquisition of EMC and VMware. EMC had an 80 percent stake in VMware and is now a tracking stock for Dell. VMware share shares have increased by more than 60 percent over the past 12 months.

An IPO could help Dell pay off the massive debt from the EMC acquisition. Dell has around $46 billion in debt remaining from the deal.

As for a potential VMware buyout, Dell partners said they have seen big sales gains as a result of the tighter ties between Dell EMC and VMware.

"Michael Dell clearly wants VMware to be a bigger part of what Dell EMC does," said one partner, who did not want to be identified. "There is a lot of leverage partners have gotten with stronger ties between VMware virtualization and Dell EMC converged infrastructure. That is a very significant play for Dell EMC and the channel."