In this segment of the Motley Fool Money podcast, host Chris Hill and Total Income's Ron Gross consider the situation of the formerly potent personal computer maker, which soared in the 1990s and then sank in the 2000s. If the company is looking to go public again, the list of questions any potential investor should be asking has to start with "Why?" Next is, "What would come next?" And the gang has some opinions.
A full transcript follows the video.
This video was recorded on Jan. 26, 2018.
Chris Hill: Dell Technologies (NYSE:DVMT), formerly Dell Computer, was one of the hottest stocks of the 1990s. Dell went private in 2013 and is now reportedly considering a return to the public markets. Ron, does Dell need the money, or are they just crushing it in the private market and they just want to raise some capital to crush it even more in the public market?
Ron Gross: I think it depends if you're a cynic or not. Perhaps they're doing better and transitioning their business nicely, and now it's time to reenter the public markets. Or, perhaps they need to pay down their massive debt load. Which, by the way, interest expense is not as deductible as it used to be under the new Trump tax plan, so that could be something on their minds. Or, it could be an exit strategy for Silver Lake Partners, which helped Michael Dell take the company private for $25 billion. Earlier in the day, I was feeling a little more optimistic, now I'm feeling a little bit more cynical, and I'm thinking it's mostly about exit strategy.
Hill: So, part of the reason that Dell struggled after the turn of the century was because they were, first and foremost, a computer maker. We were talking earlier about Intel and the way they're trying to shift their business. Isn't that a challenge that Dell needs to overcome if they're really going to succeed in the public markets once again? Because Michael Dell really seemed like he's a lot happier guy in the private markets.
Gross: Probably so. And they're in a very competitive space in the cloud business, whether it's Amazon's AWS or Microsoft Azure, and others. It's an uphill battle. You'll recall, they acquired EMC back in 2016, and also have a big stake in VMware. There's actually a tracking stock for Dell, ticker symbol DVMT, that tracks their ownership stake in VMware, which is an interesting way to play it. But they've always been in competitive businesses, and at least in the later years, been somewhat behind the 8-ball.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Chris Hill owns shares of Amazon. Ron Gross owns shares of Amazon and Microsoft. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends VMware. The Motley Fool has a disclosure policy.