Dell Acquisition Creates a Channel Opportunity

Ah, chaos. It's when all the best business opportunities emerge.

Dell created some chaos this week with the announcement that it would go private in a huge deal valued at $24 billion. (Well, intensified the chaos is probably a more accurate way to put it. Dell admitted in its official statement on the deal that rumors of the joint Michael Dell/Silver Lake merger agreement were first published on Jan. 11.)

Rumors and uncertainty are the lifeblood of any good channel and customer poaching effort.

Dell for years played successfully on the ongoing chaos among top management and the board of HP to bolster its partner efforts.

Returning the favor, HP pounced immediately on Dell's news. "Dell has a very rough road ahead. The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited. Leveraged buyouts tend to leave existing customers and innovation at the curb," HP asserted in a formal statement.

Assuming HP would rush the same message to Dell partners, Dell's channel chief Greg Davis issued his own statement to reporters: "As Dell enters this exciting new chapter, our commitment to channel partners does not waiver. As a private enterprise, we will continue to execute our strategy of delivering best-in-class solutions and growing our channel relationships."

Dell's positioning of the potential effects of privatization paints a very different picture from HP's. Talking about the deal, CEO Michael Dell implies that moving away from the quarterly reporting pressures and subsequent stock market rewards and punishments will free Dell to pursue strategic objectives more nimbly.

"We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise," Michael Dell said in statement. "Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision."

For those partners reliant on the PC business, meanwhile, there is a new obstacle in place in the private deal to keep Dell from rushing for the exits too quickly. Now that stockholders can't punish Dell for taking a short-term revenue hit for dramatically reducing its declining PC business in order to focus on better growth opportunities, Microsoft could serve to slow Dell's potential transition.

Microsoft loaned $2 billion to the Dell-Silver Lake group for the deal. Microsoft's stated aim? "Microsoft is committed to the long term success of the entire PC ecosystem and invests heavily in a variety of ways to build that ecosystem for the future," the company said in a statement.

HP is coming after Dell's customers and partners, Dell is assuring its channel that there's a place for them in Dell's new private world, and Microsoft is there to make sure Dell remains a pillar of the PC ecosystem. What's a channel partner to do? Play HP and Dell off each other ruthlessly to secure the best terms for yourself, of course.

Posted by Scott Bekker on February 07, 2013