Dell will host an analyst meeting Tuesday as part of its push to sell Wall Street on a complex deal that will return the company to the public market. Photo: Gleb Garanich/Zuma Press
Dell Technologies has to convince investors this week that it isn’t the next Hewlett Packard . The company’s recent performance should make that a little easier.
Dell will host an analyst meeting on Tuesday as part of its final push to sell Wall Street on a complex deal that will return the corporate IT giant to the public market. Dell went private in 2013 and has since merged with EMC Corp, resulting in a company on track to generate more than $90 billion in annual sales for its current fiscal year, compared with about $57 billion when it left the public stage. At that level, Dell would rank as the fifth-largest publicly traded tech company in the U.S. by annual revenue, just below Microsoft , which surpassed the $100 billion mark in its latest fiscal year.
But size isn’t everything, and it is sometimes a hindrance. Dell’s archrival, HP, spent the past few years divesting and ultimately splitting into two smaller companies after its size became unwieldy. Dell will make the case that it’s a different kind of giant—with a better mix of businesses.
The timing is good. Dell’s overall revenue rose 18% year-over-year to $44.3 billion for the six-month period ended Aug. 3. The company is benefiting from a strong PC cycle, and server revenue jumped 34% year-over-year to hit a record $5.1 billion in the most recent fiscal quarter. The addition of EMC’s higher-margin data storage business has improved profitability. And Shannon Cross of Cross Research notes that the merger provided very strong cross-selling opportunities, as the two companies’ core markets had little overlap previously.
Dell also has a stronger collection of software assets than HP did. This most notably includes its 82% ownership stake in VMware, which has been growing at a double-digit rate over the last six quarters.
That still may not be enough for activists who are reportedly unhappy with the price Dell is offering for the tracking stock it created to help finance its EMC acquisition. Dell’s current plan to go public involves buying out that tracking stock for a mix of cash and shares in the resulting Dell entity, so enough opposition by holders of the tracking stock could stymie its efforts. A source close to Dell says the company won’t raise its price, so Dell will need to make an especially strong case on why it can succeed where HP failed. It’s at least off to a good start.
Write to Dan Gallagher at [email protected]