February 08, 2013, 5:49 PM — Dell's decision to go private has led to mixed reaction from the company's customers, who are watching developments closely as they consider the next steps in their product procurement plans.
Some of Dell's customers think privatization is a good idea, while others are waiting for more details surrounding the company's direction under new ownership. Some customers also have questions about the fate of PC operations as the company chases high-margin enterprise products, and about the impact of the deal on service and support.
Dell this week announced it was being purchased by Michael Dell and equity investor Silver Lake for US$24.4 billion. The transaction includes a $2 billion loan from Microsoft and debt financing commitments from Bank of America, Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.
Analyst firm Ovum said CIOs should assess the risks involved in Dell's decision and have backup plans for product procurement in case the company plans a "radical" shift in hardware, software and services. The company for years has been trying to shed its reputation as a PC company, and is emphasizing more higher-margin enterprise IT hardware, software and services.
Support features are governed by the service-level agreements in customer contracts, and going private won't have an impact on the company's current contractual responsibilities, said Charles King, principal analyst at Pund-IT.
The company is still months away from becoming private, but concerned CIOs may want to take a close look at the contracts they sign, King said.
"Going private will tend to make Dell's strategies considerably less transparent than they are today. If CIOs are concerned about the possible longevity of specific Dell products or divisions, they need to discuss those issues with the company, and lock support details and features into any agreements they sign," King said.
After Dell announced its intention to go private, Hewlett-Packard launched a campaign to pry away Dell's customers. But Dell is well-financed and intends to meet its obligations, said Roger Kay, president of Endpoint Technologies Associates.
"Whenever a major corporate event occurs, or even a hint or rumor of one, competitors step in and try to sow FUD (fear, uncertainty and doubt)," Kay said. "They all do it. Dell did it to HP during the Leo [Apotheker] debacle."
In a letter published this week, CEO Dell tried to reassure customers that it would continue to deliver a "fantastic customer experience" under proposed new ownership, and that the move will help the company accelerate growth and innovation.