Why Dell's Private Future Will Mirror its Public Present

PC World —

It's official: Dell (the man) is taking Dell (the company) private once again, with the help of a significant investment by the Silver Lake investment group and a $2 billion--with a "B"--loan from Microsoft. Aside from bankers, though, who cares about the financial details? Titanic events aren't titanic because of the nuts and bolts. It's their impact that's earth-shaking.

Dell Goes Private, Bought By Michael Dell and Silver Lake

What the New Dell Means for IT Outsourcing Customers

This morning, I spoke to several analysts to get a feel for what Dell's privatization could mean for me, you, and the PC ecosystem as a whole. Hint: Microsoft's involvement isn't as portentous as it seems at first glance.

Why go private? It's the cost of doing business

Simply put, Dell's in the midst of a complex restructuring, realigning its focus to become more of a full-featured, enterprise-oriented company--think IBM if IBM hadn't sold off its PC business. The wisdom of that transition won't be fully known for years to come, but in the short term, Dell isn't likely to generate the constantly increasing profits demanded by public stockholders. So the company's going private.

"Dell wants the opportunity to finish its 'remake' without being bothered by the public markets," Stephen Baker, NPD's vice president of industry analysis, told PCWorld. "The market won't let go of the fact that it sees sales declines in PCs. Dell has to go back and build out its enterprise, cloud, and software services, and that's going to take some time and money. In the short term, that [restructuring] is not going to turn the overall trend of the company around, and it's kind of tough to do all that with the Wall Street guys breathing down your neck."

Once the privatization is approved and Dell manages to shrug off the oh-so-demanding public, Rob Enderle--founder and principal analyst at the Enderle Group--expects the company to undergo some major restructuring and "possibly do something very unique, like buy a services company."

Dell will no doubt need to make some acquisitions as part of its ongoing remake, and it would've been difficult to do so while simultaneously satisfying the whims of Wall Street. Then again, Dell's privatization deal loads it up with debt and takes away the freedom of public equity, so the company will have to proceed very cautiously before pulling the trigger on a merger. It simply can't afford a debacle similar to HP's purchase of Autonomy .

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