Michael Dell's investor presentation describes why the PC giant needs to go private fast. But Dell forgot to mention channel partners amid the accelerating shift to cloud, mobile, tablet and virtualized data centers.
Will Michael Dell's open letter to shareholders convince investors to back his plan to take Dell private?
Why does Dell need to go private? Michael Dell makes his case in a presentation (an open letter to investors, of sorts) called The Rational for a Private Dell. The presentation, revealed in an SEC filing, includes some familiar themes: PC market weakness; and rapid transitions to cloud, mobility, virtualization, and software-defined networking (SDN). But why is Michael Dell making his case now?
The answer involves timing. Michael Dell and Silver Lake Partners are striving to buy the company and take it private for $13.65 a share. Investor Carl Icahn has raised questions about the proposed buyout. A shareholder vote, addressing Dell's buyout plan, is set for July 18.
Michael Dell's Open Letter
Eager to get investors and customers in his corner, Michael Dell's presentation makes the following points:
- Dell's transformation from a PC-focused business to an Enterprise Solutions and Services (ESS)-focused business is critical to its future success, especially as the PC market is changing faster than anticipated.
- PC market fundamentals are under signficant pressure, with growing threats from the emergence of cloud computing and mobile/tablet products.
- Dell's ESS business is growing but faces ongoing integration and competitive risks; Dell's market share in software and services remains at less than 1 percent.
- Completing Dell's transformation as quickly as possible is essential.
As a private company, Dell can move more rapidly and make more dramatic moves without worrying about day-to-day investor reaction and stock fluctuations, the company has argued. Icahn, however, has asserted that Dell is overstating its challenges and understating the company's market value. In other words, Michael Dell is attempting to buy the company at a deep discount, Icahn has asserted.
Don't Forget Partners
What's The VAR Guy's spin? It's time for Dell to go private. But Michael Dell should revise his investor presentation to include channel partners -- particularly cloud services providers (CSPs) and cloud integrators.
Dell recently abandoned (or delayed) plans to launch its own public cloud. As a result, Dell will need to become a major supplier to third-party cloud companies. Dell will need deeply skilled channel partners to engage those CSPs.
Channel Chief Greg Davis and Michael Dell have previously stated their ongoing commitment to partners. Plus, Davis appears confirmed to speak at CompTIA ChannelCon (formerly Breakaway) in mid-summer. That's a good sign for Dell's partners. But Michael should have reinforced that partner commitment in his open letter to shareholders and investors.