Dell CFO: Going Public Will Open ‘Additional Velocity’ For Channel In 2019


Channel partners stand to realize multiple benefits in 2019 as a result of Dell Technologies becoming a public company again late last year, said Executive Vice President and CFO Tom Sweet in an exclusive interview with CRN.

The improved capital structure Dell Technologies gained via its move last year to return to the public stock market will “catapult” it ahead of its competition by accelerating VMware integrations, enabling financial flexibility for future acquisitions and providing sales “velocity” for channel partners, said Sweet.

“The whole goal here is to align economics and equity and trust,” he said.

As a private company, Dell had a very complex capital structure along with multiple classes of stock and different layers of debt, he said.

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“We at a Dell Technologies level own 81 percent of VMware, but yet we were sharing that VMware economic stake with that Class V tracker stock. The dynamic that it created was putting friction in the system in terms of our capability to drive integrated solutions effectively across the family of companies. Why? Just think about the fact that we can sell [customers] storage arrays, we can sell them software-defined, hyper-converged infrastructure—but depending on what solution we drove, those margin dollars moved around the company. So say … I’m going to sell you a software-defined vSAN solution, I’m essentially not putting margin dollars at the Dell level, I’m putting them on the VMware level. Therefore, I’m sharing that margin pool then among both in the Class A VMware holders as well as the tracker holders.”

The new capital structure is going to drive more business momentum for partners, said Sweet.

“From a channel perspective, it should open up additional velocity as we think about how we more effectively go to market and position integrated solutions. Because the world of today many times is, ‘I don’t want three-tier architecture. I want a more simplified, less complex solution.’ Therefore, VMware is a pretty significant part of that solution strategy for us,” said Sweet.

Another key benefit as a public company is that Dell now has the option of leveraging its stock as currency to acquire new companies. Dell doesn’t have any huge M&A plans right now, according to Sweet, but the $91 billion company is now seemingly well-positioned with the option to leverage its stock or some combination of stock and cash in the future.

Although Dell is now full steam ahead driving as many public benefits as possible, the successful journey of debuting on the New York Stock Exchange was no walk in the park. Dell’s proposal to become a public company through a VMware tracking stock swap deal valued at $109 per share met with some concerns from shareholders—including activist investor Carl Icahn, who publicly took an aggressive stance against it. Eventually Dell boosted the value of the offer to $120 per share. That beefed-up proposal ultimately won over the majority of DVMT shareholders, paving the way for Dell to hit the NYSE on Dec. 28, 2018, trading under the symbol “DELL” at $46 per share, and issue approximately 150 million shares of its Class C common stock.

Financial firms and analysts have high hopes for the stock, with Goldman Sachs and Bank of America Merrill Lynch giving DELL a “buy” rating while targeting shares to climb to $59 and $63 per share, respectively. Investors cited cross-selling opportunities as well as strong market momentum in storage, servers and PCs as reasons to be bullish about Dell Technologies.

Scott Winslow, president of Winslow Technology Group, a Waltham, Mass.-based Dell Titanium partner and CRN 2018 Triple Crown Award winner, said he understands why the financial market is betting on Dell.

“As a partner, we always evaluate different OEMs based on whether we would invest in the company financially. ‘Would we invest in this company to provide solutions to our end users?’” said Winslow. “Dell passes that test with flying colors, which is why I’m very bullish on the company going public. If you look at the landscape of the major OEMs out there, we feel like Dell has got the most aggressive strategy. … They have a great story and a full product set, an aggressive acquisition strategy, they’re very honest about fixing any weaknesses and have a great partner program. The company is going to perform very well in the public market.”

Overall, Dell Technologies plans to slingshot itself ahead of the competition in 2019. “It’s a year we should use to catapult forward,” Sweet said. “2019 should be a great year for us.”