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Channel Gung-Ho Over Microsoft's Dell Investment

Partners say a Microsoft investment in Dell's private equity bid would be a game changer that could result in big sales and profit gains for them as they develop stronger strategic ties to both vendors.

It's a game changer.

That's what solution provider partners are calling a potential $3 billion Microsoft investment in a bid to take Dell private in a leveraged buyout.

Solution providers, in fact, say the potential investment could result in big sales and profit gains for them as they develop tighter, more strategic enterprise solutions relationships with the two industry giants.

[Related: 6 Reasons Dell Should Go Private ]

Peter Estes, co-founder and president of Axis Business Solutions, one of Dell's fastest growing partners headquartered in Portsmouth, N.H., said he expects sharp increases in both his Dell and Microsoft business if the deal goes through.

"My hope is we would see our Microsoft business go from 5 percent growth to the 25 to 30 percent range," he said. "We are very strategic with Dell. We sell the Dell client [systems], storage, networking, services and Dell Cloud. If they can deliver a stronger Microsoft relationship, our Microsoft numbers will go up. This has the potential to be a real game-changer for us."

Estes said his Dell business was up 50 percent in 2012 to $7 million, and he expects to double that business to $14 million in 2013 in the wake of Dell's transformation to a full enterprise solutions company with offerings that include EqualLogic Compellent in storage, SonicWall in security and Brocade in networking products.

Bob Venero, CEO of FutureTech, a Holbrook, N.Y.-based solution provider whose Dell business was up 400 percent in 2012, expects to see even greater growth this year if Dell goes private.

"I believe that we can be more strategic and creative with Dell in a private environment than if they are public. If this deal happens, we should see exponential growth beyond what we have seen today in our Dell business," Venero said. "I believe private companies can have more stable and consistent channel relationships because they are not always under the scrutiny of external requirements to support a publicly held model. If Dell wants to create a unique channel program with a subset of partners, it is a hell of a lot easier to do that as a private company than as a public company."

According to a report by CNBC, Microsoft is in talks to become a "mezzanine" -- or preferred financing partner -- for between $1 billion and $3 billion in Dell's reported plan to move ahead with a private equity-backed leveraged buyout.

Dell has reportedly had discussions with private equity firm Silver Lake Partners along with several financing organizations about going private, a move that could require up to $20 billion, according to reports.

Dell and Microsoft would not comment.

Estes said the deal could improve margins all around in an industry where end-of-the-quarter discounting has become common place for vendors trying to hit quarterly sales targets as publicly held companies. Tight-fisted business customers fight for bigger discounts at the end of each quarter as IT vendors scramble to make sales targets. "The business community has come to expect it," said Estes.

NEXT: Partners Applaud Dell CEO Michael Dell's Channel Leadership


No matter what happens, Axis Business Solutions' Estes says his company will continue to become more strategic with Dell, which has become an enterprise channel solutions power under Dell CEO Michael Dell's leadership. Axis has been a Dell channel partner since 2007 and has seen its business soar as the Dell CEO has transformed the company from a channel antagonist into a seasoned channel partner with a product portfolio that runs from the desktop to the data center.

"Michael has been critical to our success" said Estes. "He has reshaped the company. In the early days it was difficult. Dell had to overcome that direct-only mentality. Michael repeating the mantra of Dell being channel focused has really changed the company. Without his vision it would have failed because that direct mentality was so ingrained in Dell. He made sure the direct sales force got the message that Dell needed to embrace the channel. And it has been good for Dell and for Dell's partners."

Key to Dell's success is a broad and deep engagement strategy with robust field engineering and sales talent working hand in hand with Axis to deliver a full enterprise Dell solutions suite. "Dell has put its money where its mouth is" said Estes. "They have quality field reps. We aren't talking to somebody in Oklahoma or Austin or Seattle. We have storage and networking engineers we work with and other local resources with a great channel management team coordinating all the resources. With Dell behind us, we have been able to deliver a much wider range of solutions. Michael Dell has made sure VARs like us have knowledgeable and experienced technical, sales and channel resources that are essentially part of our team."

Estes said his Dell relationship is much more strategic than his relationship with other vendors that often tout their channel commitment. He sees a potential Microsoft investment in Dell making both Microsoft and Dell more focused on working hand in hand on consultative/solutions sales with partners. "It allows both of them to be more consultative versus narrowly focused on transactional sales," he said. "It should definitely improve margins."

FutureTech's Venero sees the potential Microsoft investment in Dell as a big win for Dell, Microsoft and their partners.

"This gives Microsoft an investment that will be very profitable for them," he said. "It's a great investment. They are supporting one of their largest OEMs. Every Dell system comes with a Microsoft operating system and business software." Dell is also one of Microsoft's Large Account Resellers (LARs), a select group of Microsoft partners that sell enterprise software licenses. "Dell sells a tremendous amount of Microsoft software," said Venero. "I think it is awesome that Microsoft is willing to step up and sees the value of investing in Dell's model. Microsoft generally doesn't make this type of investment. Generally Microsoft would make an acquisition rather than an investment. But, I think this is going to be very profitable for them."

Venero, who has met more than once with the Dell CEO as he has built up his Dell business, credited Michael Dell with the vision to make Dell a much stronger player in the enterprise solutions market. "Michael Dell has always had a strategic vision beyond the next year or two's business," said Venero. "Michael is always thinking about how to move the business forward. He is always willing to look out into the future and adjust and change the business. Look at what he has done in the channel. He believed in the direct model and then he made an adjustment because it was good for the company."

Dell may be the only legendary founder still active that is driving his company to the next level. "He isn't satisfied with the status quo," said Venero of Dell. "He is making changes and adjustment to grow his company."

PUBLISHED JAN. 22, 2013

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