Texas-based computer giant Dell Technologies is set to go public again later this week, five years after it exited the stock market. In an interview with BusinessLine, Prakash J Jothee, Senior Vice-President, Commercial Sales Strategy, Planning & Operations, Dell EMC, explains the company’s rationale for going public once more and offers a peek into its strategy in recent times as it pulled off some of the most successful mergers and acquisitions.

You were one of the key executives who were instrumental in taking Dell private five years ago. Now, you plan to go public again...

The last five years were incredible. Before we went private, we were predominantly known as a client/server company. One of the main reasons to go private was to change the portfolio to meet the market’s needs. We decided that we want to be a tech infrastructure provider. In line with that, we wanted to build our storage portfolio (Dell acquired EMC, a provider of data-storage devices, in what is considered the largest-ever tech acquisition) and virtualisation technology (by buying VMware).

Along with that, cyber security was also a focus. All these changes were better done in a private environment, away from the constant scrutiny of stakeholders. Also, financially, the debt market was cheap for us to make the decision to go private. The timing was right.

So, how important was it for Dell to go private?

When Michael (Dell) took the company private a few years ago, the entrepreneurial DNA was unleashed again. We invested in R&D — close to $13 billion across our entire portfolio — and also invested in sales coverage.

Any company which has an IT spend was covered by a Dell salesperson. All of the core DNA which Dell had was achieved by going private.

To do all this under the glare of the public is very difficult. We look 3-5 years ahead in terms of investment.

So, why have you chosen to go public now?

The predominant reason is that it is not a traditional IPO. The way it works is that as Dell was able to take over VMware through the EMC acquisition, investors are able to have a piece of Dell through DVMT, a special tracking stock which reflects the company’s ownership stake in VMware. The plan, announced in July, involves converting DVMT shares into a new Dell share, which is going to be publicly traded. We are not raising capital from the markets. This is more about simplifying our capital structure. Actually, the new structure brings Dell closer to VMware. Dell’s ownership of VMware will now be greater than 80 per cent.

Dell has acquired some major IT companies — EMC of course — as well as Pivotal and SecureWorks. What is the common thread in these acquisitions?

Several reasons. Dell was known as a client/server computing provider but not as a strong player in the storage or virtualisation space. In the IT transformation stack, we needed hardware and software. With acquisitions, we got both. Dell’s majority of revenues was mid-market. EMC and VMware had a majority of revenues coming from the top 3,000 global customers. So, it fits like a glove both from the portfolio and customer standpoint. And now, there is very minimal portfolio and customer overlap.

For someone who has played a key role in all these acquisitions, is there any reason for the failure of some of the large M&As? Also, how do M&As play out now?

In general, given the market situation, the financial rigour on M&A has risen. People are hesitant to pay exorbitant dollars. In successful acquisitions, the initial rationale of why it is done needs to be relayed to all parties. Then, the leadership needs to work together, as there is a lot of change, which both stakeholders have to go through. Also, if the culture of both the companies is similar, the decision-making becomes easier. I also believe there will be more consolidation-focussed acquisitions now.

Now that you are going public, how are all the acquisitions faring?

All the aligned businesses are growing strong. The core storage business (the Dell-EMC portfolio) globally has shown four consecutive quarters of growth, and is growing in double digits. Our core client/server business is seeing continued momentum. VMware is seeing plenty of momentum, and Pat Gelsinger, the CEO, recently said that we see a synergy of billion-dollar business. We have achieved that. We have got 2,000 new customers. Added to that, for Pivotal, $400 million of the business was through Dell. Secureworks has shown more than 100 per cent Total Contract Value growth.

With the commoditisation of hardware and entrants of companies like Amazon (in the chip and data centre business), will Dell customers look at new alternatives?

When you look at the Dell strategy, it is about having the best solutions; from the edge, to the core, to the cloud. At the edge, it is about the workforce transformation and access across different devices (desktop, thin client and laptop). Our proposition is that together with VMware, we will give secure access as a wrapper around a device. In the core and cloud, we believe customers are going to the hybrid cloud. Renting will never be cheaper than owning. Owning gives a better return over the long run. We have the infrastructure to build solutions in the cloud or on premises. Our portfolio of companies is our differentiator.

At one point in time, Dell was betting big on mobile devices, but then backed away from the sector. After going public, will the company rethink this strategy?

We consciously got out of it. The strategy is not just about what you want to do but also what you don’t want to do. Apart from three or four, there are not many mobile equipment manufacturers who are making money. Apple owns everything from hardware to software. Samsung makes mobile chips and LED screens. The way you make money in this is very different. As more devices become ‘anywhere, any-place’ gadgets, with Workspace One, we believed that a person can work on any phone and that seemed a better business model than manufacturing a phone.

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