HP Slams $24.4 Billion Dell Private Equity Deal2:26 PM EST Tue. Feb. 05, 2013
Hewlett-Packard Tuesday slammed Dell's $24.4 billion private equity deal, charging that the "significant debt load" will hurt its rival's ability to "invest in new products and services."
"Dell has a very tough road ahead," HP said in an unattributed statement sent to the press. "The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited. Leveraged buyouts tend to leave existing customers and innovation at the curb. We believe Dell's customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity."
HP would not comment on when or whether the company would offer any competitive swap-outs or financial incentives to get partners or customers to replace Dell gear.
Dell Tuesday reached an agreement with private equity firm Silver Lake Partners and other financing companies to go private through a leveraged buyout at $13.65 per share, or $24.4 billion. The deal includes a $2 billion loan from software giant Microsoft along with cash from Silver Lake, MSD Capital and additional financing from BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.
Several solution providers said they see the Dell private equity deal accelerating Dell's ability to innovate as it sharpens its focus as the enterprise market.
"I believe that [Dell CEO] Michael Dell's leveraged buyout is going to allow for more innovation in its product sets," said Bob Venero, CEO of Future Tech, a Holbrook, N.Y.-based Dell and HP partner. "Michael wants to innovate. He has shown that and proven that. This is going to allow him to innovate more rapidly without the public scrutiny."
Peter Estes, president and co-founder of Axis Business Solutions, a Dell and HP partner based in Portsmouth, N.H., said in an email to CRN that HP's statement is "predictable but off the mark."
"Many clients we work with have become disenchanted with slow-moving manufacturers, and Dell has a real chance to differentiate themselves," said Estes. "A private Dell will be more nimble and this will give them the ability to get to market faster with new additions to their best-in-class solutions suite. If Dell can expand its suite of solutions, this will only help our consultants and engineers to better serve our customers. I also believe that this expansion will result in local companies having a strong desire to look to larger local Dell partners like Axis to help them design and implement new solutions."
NEXT: Competition Between HP, Dell Is Heating Up
HP's decision to slam Dell comes as the competition between the two computer giants heats up, with both of them courting solution provider partners with a broader enterprise solutions and services portfolio.
It also comes with HP under fire for its handling of what may well be its biggest bid to transform itself into a software and solutions power with its $11.1 billion acquisition of Autonomy. HP initially characterized the Autonomy deal in August 2011 as cloud computing game-changer.
Last November, still under fire for the high price it paid for Autonomy, HP took an $8.8 billion charge against earnings, alleging "serious accounting improprieties" by Autonomy.
While HP top executives have been reticent to publicly criticize Dell, Michael Dell has repeatedly scoffed at what he has seen as HP's strategic missteps, from HP's decision to consider spinning off its PC business in August 2011 to the HP Autonomy acquisition.
In fact, Michael Dell said last year in an interview with the U.K. newspaper The Telegraph that he was offered a chance to buy Autonomy but rejected it because it was "overwhelmingly obvious" that Autonomy was overpriced.
FutureTech's Venero said he sees the HP statement as a "market opportunity to take share because there is a change happening at Dell."
That said, Venero stressed that he sees the private equity deal as a plus for Dell. "It's going to give them more flexibility and more autonomy away from scrutiny of the compliance-ridden public market," he said.
PUBLISHED FEB. 5, 2013