Dell ‘Mulls’ IPO For Pivotal Cloud Unit

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Tech giant Dell is said to be exploring its options as it seeks to grow either via acquisition or an initial public offering

Dell Technologies is reportedly looking to raise funds to help pay off the debt it accrued with the takeover of EMC and could launch an initial public offering (IPO) for its Pivotal cloud business.

Another option could be making another acquisition that would open new revenue streams.

The firm is also not being helped by a stagnant PC market, a challenging data storage market, and also fierce competition in the cloud space against the likes of Amazon Web Services, Microsoft Azure, and Google Cloud, all of which is putting pressure on prices.

Fund Raising

Dell has had a turbulent five years. In 2013 founder and CEO Michael Dell took his company private, amid a bitter battle with activist investors including the likes of Carl Icahn.

The move helped Dell cut costs and concentrate on the corporate data centre market without the quarterly investor scrutiny that came with being a public company. And then three years later, Dell acquired storage giant EMC Corp and its majority stake in virtualisation giant VMware, but it also took on a massive debt load to seal the $67bn deal.

Indeed, it is thought that Dell is currently sitting on a $52.5 billion debt pile, and this is expected to become more troublesome this year when US tax reforms kick in. Reuters said these new tax reforms caps a company’s ability to deduct interest expense to 30 percent of its annual earnings before interest, tax, depreciation and amortization.

And it pointed out that the acquisition of EMC also failed to deliver the cost savings and performance Dell had originally projected.

Cloud IPO

And this means that Dell needs funding, and is therefore said to be considering a public share sale for its Pivotal Software cloud-computing venture. In 2016, Pivotal secured $253 million (£175m) Series C funding from investors including Microsoft and Ford.

Dell has reportedly already met with bankers last year to discuss that possibility and was told the company could fetch a valuation of $5 billion to $7 billion.

Reuters meanwhile speculated that any of these deals would offer a path to private equity firm partner (Silver Lake) to cash out on its investment in the company. Silver Lake is said to own 18 percent stake in Dell.

Dell for its part is remaining tight lipped about the matter.

“Dell does not comment on rumour or speculation,” a spokesperson told Silicon.

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Author: Tom Jowitt
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