|Could Dell Inc.
spinoff talk become reality?
Monday, July 20, 2015
Michael Dell teamed
with Silver Lake Partners in 2013 deal.
Did director foretell change or is he trying to
generate cash flow?
Is Dell Inc. really
thinking about spinning off or combining some of its business units —
or are a major shareholder’s comments suggesting that possibility
really aimed at luring some dividend payments out of the technology
That was the question
industry analysts were pondering after Egon Durban, who sits on Dell
Inc.’s board of directors, suggested that there are parts of the
business that could be spun off or combined.
Durban is managing partner
of Menlo Park, Calif.-based Silver Lake Partners, the venture capital
firm that teamed with Dell Inc. founder and CEO Michael Dell on the
$25 billion deal to take the company private in 2013. Silver Lake
Partners owns a 25 percent equity stake in Dell Inc., with Michael
Dell controlling 75 percent.
Speaking at Fortune
magazine’s Brainstorm Tech conference last week, Durban said Dell Inc.
is considering the possibility of spinning off or combining two
business units: Secure-Works, a cybersecurity business acquired in
2011 for $612 million, and Boomi, a cloud integration software
platform acquired in 2010 for an undisclosed amount.
Dell Inc. has grown into a
global organization with more than 100,000 employees, and has about
14,000 workers in Central Texas, where it is the area’s largest
Durban said that Dell Inc.
was not “committed at this stage” to doing any spinoffs or
combinations. He also said that Silver Lake’s equity in Dell Inc. has
increased in value since the buyout closed.
In a written statement,
Dell Inc. spokesman David Frink said: “Dell is focused on delivering
technology solutions that work harder for our customers and helps them
succeed. We have our strongest-ever product and services portfolio and
have acquired significant new skills and capabilities over the past
several years. We won’t have additional comment on Mr. Durban’s
industry analysts were divided Monday on whether Durban’s comments
were a sign that Dell Inc. will, in fact, look to spin off part of its
business, or whether Durban’s intent was to generate some cash flow
for his firm.
Patrick Moorhead, an
analyst at Moor Insights & Strategies, said that if he were to
take what Durbin “said on stage literally, it does appear that Dell is
looking for creative ways to ‘unlock’ the value and that could mean a
potential spinout or sale of high value assets.”
“The interesting thing will
be to see if what we take on stage at face value, how Dell maintains
the same end-to-end enterprise value proposition if its competitors
can get access to Secure-Works and Boomi. Michael Dell is a brilliant
guy and I’m sure whatever he does is monetarily advantageous,”
However, analyst Roger Kay
with Endpoint Technologies Associates said Durban’s comments could
also be him looking to speed up the return on his company’s
Silver Lake is “itching to
get something for their involvement” in the Dell Inc. buyout deal, Kay
Durban’s comments “point to
the dynamics of the relationship with Silver Lake ... a company whose
only business is to make money with money, and they come into a deal
where liquidity hasn’t been completely obvious,” Kay said. “So it
doesn’t surprise me that Silver Lake would float the idea in public.
The concept is, here’s a way to win some liquidity for them.”
Moorhead said if that is
the case it “would also indicate that Durban, Silver Lake and Dell are
misaligned. For Dell to have an end-to-end play, they need an
end-to-end offering. I will reinforce there are creative ways to do
that even if assets are spun out.”
Kay, meanwhile, said he
thinks the odds of a spinoff deal happening “are really low.”
“If there was really this
unlocked value potential that was spilling over the dam,” Kay said,
“then Michael Dell would be aware of that.”