One year on, a privatised Dell has retooled for new landscape

Technology and its markets keep shifting. Since 2013’s leveraged buyout, Dell has redefined its purpose

The privatisation of Dell was described as the biggest and nastiest tech buyout since the beginning of the global financial crisis.

It was October 2013, and chief executive Michael Dell, along with his right-hand man chief financial officer Tom Sweet, had finally won a 15-month-long battle to privatise the PC maker in a $24.4 billion deal.

“It was clearly a very challenging time for us. However, despite tensions, we couldn’t lose sight of what we were trying to accomplish,” Sweet says.

The privatisation battle between Dell and its shareholders was made ever more difficult by billionaire investor Carl Icahn.

In June 2013, Icahn started his own attempt to buy out the company, with the backing of South Eastern Management, Dell’s largest outside shareholder. His feelings on the buyout, and the board of Dell, were made known to the world in a tweet he sent on July 24th which said: “All would be swell at Dell if Michael and the board bid farewell.”

Testing time

Speaking of Icahn, Sweet says that while it was a very testing time, it wasn’t personal and no sleep was lost in the process.

“I have never actually met the man. For him, it’s just business. That’s what he does. He is an activist and he is very good at it, especially at using the media to drive his message and create visibility on what he wants to achieve. He created a bit of uncertainty at a difficult time.

“Apparently he thought there was an opportunity to come in and apply his business model here, but ultimately I believe we got to the right answer for the shareholders. Thankfully we were able to move past it, but clearly it was a big distraction at the time.”

Sweet says the key to maintaining decorum with employees and customers during this tumultuous time at Dell was to separate the leveraged buyout team from the rest of the company and to maintain clear communication with employees.

Eliminating distractions

“What you try to do when put in situations like this is to isolate. The vast majority of the Dell team was never involved in the ‘going private’ work. It was a small team and we tried to keep the rest of the employees focused on running the business and serving our customers. We had to eliminate the distractions for the bigger team.

“We also tried to constantly communicate with our employee base and let them know that we would get through this in one piece. It was important to have stability, for the employees to feel like they understood what was happening and knew where the company was headed.”

October 29th marked one year since the successful privatisation of the company, which Sweet says has brought many benefits including a great amount of freedom.

“While there is nothing a private company can do that a public company can’t, the question is how fast and how big you can go with some of these investments.

“In a public company you get judged every 90 days on your earnings and your revenue growth, so it has been very freeing for us going private and stepping away from those constraints.”

While the company, with the financial backing of private equity firm Silver Lake, was relieved to have successfully closed the leveraged buyout deal, it has left them with many challenges to overcome.

“The biggest challenge we are faced with right now is the $17 billion debt on the balance sheet. We are continuing to invest in the business but we’re also paying off the debt at the same time – the real challenge is in balancing the two,” Sweet says.

Another challenge for Dell is reinventing its image in a market now centred on tablets and smart phones. Sweet believes that the answer lies in constantly diversifying the business, and investing in new areas of growth.

“The interesting thing about technology is that it’s always changing,” says Sweet. “If you don’t innovate and you don’t reinvent and you don’t recreate yourself, you get left behind.

Primary focus

“We probably did not get started on that journey as fast as we should have but it has been our primary focus for the last five to six years, ever since Michael came back as the CEO of the company.”

The company, which celebrated 30 years in business this year, has expanded into a wide range of areas including software, data management and even a financial services centre (Dell bank) in Dublin, which is the first new bank to be approved by the Central Bank of Ireland in the last five years.

“When I joined the company in 1997, it was primarily all about PCs, notebooks and desktop computers. There were only 15,000 employees at the time and an annual revenue of about $12 billion.

“Flash forward to 2014 and you have a revenue of over $60 billion and a company with over 100,000 employees,” says Sweet.

The company also launched “Dell for Entrepreneurs” in January of this year, an initiative that aims to support the start-up community in Ireland.

A fund of up to €10 million, funded through Dell Bank, has been made available to Irish start-ups with a technology focus.

Things were not always good for Dell in Ireland, however. In January 2009 the company announced 1,900 job losses at its plant in Limerick, with manufacturing operations moving to Poland.

Painful decision

“That was a very painful decision, but a decision that needed to be made. It was all about where the best place to have our global manufacturing footprint was. And to be competitive in this industry we needed to get to a footprint that made sense to us from both a logistics and a cost perspective,” says Sweet.

Dell now employs over 2,500 people in Ireland and while the numbers aren’t what they were five years ago, the types of job have shifted upwards, with a lot more high-skilled and technical positions on offer.

“We just recently announced 60 new positions for the e-commerce team at the new R&D centre in Dublin.

“When we look at the Irish workforce, we see a really strong, technically grounded population. This means great fields of opportunity to bring in good talent,” says Sweet.

Read More