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Post dot come melt down the rules and requirements around financial reporting were substantially strengthened. Some of that was a good thing but in general it w

Post dot come melt down the rules and requirements around financial reporting were substantially strengthened. Some of that was a good thing but in general it was an over reach. C level people now signed their names and risked prosecution. The way revenue was recognized became so conservative as to be nonsensical in many cases. The costs layered on to manage this became significant. In short, it became more and more difficult to innovate if you were a public company due to the costs and potential backlash from public markets. Facebook is a victim of this on one end. They delayed their IPO as long as they could as Zuckerberg loathed what having to please outside investors would do to the nimbleness he requires. They then waited too long and so are now trying to excite the markets with a company that's already past its most exciting part of the growth curb. Add to that obvious greed and ego in terms of pricing as high as possible and you have a huge web blanket thrown on the ability for other tech companies to IPO. Dell is on the other end. They decided it was better to invest 6 months of their lives into going private so that they too could innovate for the longer term. At the end of the day we've gone from the go-go days of the 90's where nearly any tech company would IPO to a point where very few IPO either because they can't or don't want to. That will fundamentally change how companies are funded going forward and will likely impact the amount of returns being generated at the critical (for VC's) end of the funnel. My hope is that public markets realize this and begin to roll back some of the more arduous regulations.

rrrrtttt 14y ago
I don't think Dell is going to innovate post-LBO. It's going to be saddled with debt, most of it bank debt. The new owners are going to sell off all activities that don't generate cash and milk the remaining parts until the debt is paid off. An LBO is basically a gamble that there is a cash cow under all the fat, and once the fat is trimmed investors will see the company's true value.
- kordless 14y ago
  I think there is a huge opportunity for Dell in the private cloud space. They may not innovate on technology, but they could certainly innovate with new business models using emerging technologies like OpenStack.
  - deleted 14y ago
    [deleted]
  - Swannie 14y ago
    I wonder how much Microsoft likes OpenStack... I can guess, given how much they and their customers like System Center.
  - incision 14y ago
    Possibly. Cisco has been dabbling in that area with CITEIS, but I don't get the impression it has seen too much traction. I expect an overwhelming majority of Dell gear that is doing anything along the lines of private, flexible infrastructure is running VMWare who seems to getting ever closer to EMC (whose relationship with Dell is probably thoroughly sour post-Compellent acquisition). I'd think Dell's best shot a such a move might be to work with Microsoft on a private, Azure-branded stack. I get the impression that there isn't much behind the stated OpenStack membership/support by the Enterprise names.
  - roc 14y ago
    Dell has plenty of opportunities, given their enterprise customers. The tricky part is: almost all of those opportunities involve new services for post-Microsoft IT. And how is Microsoft and their two billion dollars going to react to those plans?
- jusben1369 14y ago
  I think that's a fairly cynical response. Dell (Michael) is worth a huge amount. He has a very large stake and isn't doing this to milk his company. Whether he's successful or not is another question but it's certainly no cynical milking exercise. Now he can dig deep, not worry about earnings for the next 12 months, and tackle new opportunities.
  - rrrrtttt 14y ago
    The company's stock has been falling because investors think the PC is dying. His taking the company private means he thinks investors are wrong and the stock is undervalued. I never said this is a cynical exercise, but I think his incentive is purely financial.
  - chiph 14y ago
    Except that now, he's probably a minority shareholder (I think he invested $1bn of his own money, and I saw that MSFT invested $2bn) so if they say jump, he has to ask "how high?" All depends on how the deal was structured, though. Silver Lake, if they're like other private equity firms, are going to want a 20% return in around 5 years. They're going to put pressure on him to sell the unprofitable parts of the firm.
- refurb 14y ago
  That's a very odd claim. Lexmark came about when an LBO was used to acquire IBM's printer division. It did pretty well, no?
- hkmurakami 14y ago
  If there was ever a time when a company was going to be "okay" under massive amounts of debt, it's in today's interest rate climate where companies can borrow money for very little compared to previous eras.
wildgift 14y ago
so, are you saying you want to have another dotcom stock bubble?
- jusben1369 14y ago
  I'm not a fan of the type of discourse that believes things are either black or white and can't imagine a shade of gray.
  - wildgift 14y ago
    So which regulations are too onerous? Do you think most of the market wants more speculation, or more stability?
easyfrag 14y ago
But is Dell doing this to get away from the financial reporting required of public companies or to get away from the expectations of short-term traders who want growth at all costs?
- illuminate 14y ago
  The latter, I would hope.
glesica 14y ago
But what exactly is good about a large number of IPOs? It will change how companies are funded, but why do you assume things will be worse? It seems to me that a somewhat more thoughtful system of investing might be a good thing. In some sense, taking a company public is cheating because public markets are easy to manipulate, just look at the Facebook IPO (note, I'm not saying Facebook broke the law, just that they built up hype in a way that would not have been possible in private markets). Facebook didn't actually have to convince any VCs that it could turn a profit. It just had to convince VCs that it could have a successful IPO. There's a subtle, but important difference there.
- jusben1369 14y ago
  Hey Glesica. I think you hit the nail on the head with your 2nd last sentence. "It just had to convince VCs that it could have a successful IPO." If VC's think IPO's are less and less realistic as an exit strategy then the other major event will be acquisition exits. That will narrow the funnel of deals they'll be involved in to those that feel like they have a good chance of being acquired. To have a good chance of being acquired you'll need to get onto the radar of one from a handful of companies who have the pockets to do that (Oracle, Facebook, Microsoft - not really Apple as they right now don't do large acquisitions) I saw your comment on manipulating public markets and see it referenced below in a couple of places too by others. Honestly, Dell pulled his company private because he can't manipulate public markets. It's important to remember that. Zuckerberg and FB have gone from wunderkind to potential "loser" status when moving from private to public markets.
  - glesica 14y ago
    I agree with you that acquisition isn't necessarily any better than IPO as a target. On the other hand, there is a certain amount of money floating around out there and it has to go somewhere. Maybe the total volume of VC money would go down, but I suspect at least a good chunk of it would be re-targeted toward startups with long-term viability of their own. In terms of the market manipulation, I'm not saying that just anyone can come along and screw with the public markets. Dell can't manipulate the markets because the company is well-understood and operates in a well-understood market. Pretty much by definition startups are not well-understood and most (though certainly not all) operate in poorly-understood markets (or at least operate differently from incumbents in their markets). This means that startups have a better shot at successfully manipulating the public markets, allowing VCs to get paid even if the company itself doesn't pan out.
rayiner 14y ago
The regulation was more a response to Enron, Tyco, etc, not the dot com collapse.

rrrrtttt 14y ago

I don't think Dell is going to innovate post-LBO. It's going to be saddled with debt, most of it bank debt. The new owners are going to sell off all activities that don't generate cash and milk the remaining parts until the debt is paid off. An LBO is basically a gamble that there is a cash cow under all the fat, and once the fat is trimmed investors will see the company's true value.

kordless 14y ago
I think there is a huge opportunity for Dell in the private cloud space. They may not innovate on technology, but they could certainly innovate with new business models using emerging technologies like OpenStack.
- deleted 14y ago
  [deleted]
- Swannie 14y ago
  I wonder how much Microsoft likes OpenStack... I can guess, given how much they and their customers like System Center.
- incision 14y ago
  Possibly. Cisco has been dabbling in that area with CITEIS, but I don't get the impression it has seen too much traction. I expect an overwhelming majority of Dell gear that is doing anything along the lines of private, flexible infrastructure is running VMWare who seems to getting ever closer to EMC (whose relationship with Dell is probably thoroughly sour post-Compellent acquisition). I'd think Dell's best shot a such a move might be to work with Microsoft on a private, Azure-branded stack. I get the impression that there isn't much behind the stated OpenStack membership/support by the Enterprise names.
- roc 14y ago
  Dell has plenty of opportunities, given their enterprise customers. The tricky part is: almost all of those opportunities involve new services for post-Microsoft IT. And how is Microsoft and their two billion dollars going to react to those plans?
jusben1369 14y ago
I think that's a fairly cynical response. Dell (Michael) is worth a huge amount. He has a very large stake and isn't doing this to milk his company. Whether he's successful or not is another question but it's certainly no cynical milking exercise. Now he can dig deep, not worry about earnings for the next 12 months, and tackle new opportunities.
- rrrrtttt 14y ago
  The company's stock has been falling because investors think the PC is dying. His taking the company private means he thinks investors are wrong and the stock is undervalued. I never said this is a cynical exercise, but I think his incentive is purely financial.
- chiph 14y ago
  Except that now, he's probably a minority shareholder (I think he invested $1bn of his own money, and I saw that MSFT invested $2bn) so if they say jump, he has to ask "how high?" All depends on how the deal was structured, though. Silver Lake, if they're like other private equity firms, are going to want a 20% return in around 5 years. They're going to put pressure on him to sell the unprofitable parts of the firm.
refurb 14y ago
That's a very odd claim. Lexmark came about when an LBO was used to acquire IBM's printer division. It did pretty well, no?
hkmurakami 14y ago
If there was ever a time when a company was going to be "okay" under massive amounts of debt, it's in today's interest rate climate where companies can borrow money for very little compared to previous eras.

wildgift 14y ago

so, are you saying you want to have another dotcom stock bubble?

jusben1369 14y ago
I'm not a fan of the type of discourse that believes things are either black or white and can't imagine a shade of gray.
- wildgift 14y ago
  So which regulations are too onerous? Do you think most of the market wants more speculation, or more stability?

easyfrag 14y ago

But is Dell doing this to get away from the financial reporting required of public companies or to get away from the expectations of short-term traders who want growth at all costs?

illuminate 14y ago
The latter, I would hope.

glesica 14y ago

But what exactly is good about a large number of IPOs? It will change how companies are funded, but why do you assume things will be worse? It seems to me that a somewhat more thoughtful system of investing might be a good thing. In some sense, taking a company public is cheating because public markets are easy to manipulate, just look at the Facebook IPO (note, I'm not saying Facebook broke the law, just that they built up hype in a way that would not have been possible in private markets). Facebook didn't actually have to convince any VCs that it could turn a profit. It just had to convince VCs that it could have a successful IPO. There's a subtle, but important difference there.

jusben1369 14y ago
Hey Glesica. I think you hit the nail on the head with your 2nd last sentence. "It just had to convince VCs that it could have a successful IPO." If VC's think IPO's are less and less realistic as an exit strategy then the other major event will be acquisition exits. That will narrow the funnel of deals they'll be involved in to those that feel like they have a good chance of being acquired. To have a good chance of being acquired you'll need to get onto the radar of one from a handful of companies who have the pockets to do that (Oracle, Facebook, Microsoft - not really Apple as they right now don't do large acquisitions) I saw your comment on manipulating public markets and see it referenced below in a couple of places too by others. Honestly, Dell pulled his company private because he can't manipulate public markets. It's important to remember that. Zuckerberg and FB have gone from wunderkind to potential "loser" status when moving from private to public markets.
- glesica 14y ago
  I agree with you that acquisition isn't necessarily any better than IPO as a target. On the other hand, there is a certain amount of money floating around out there and it has to go somewhere. Maybe the total volume of VC money would go down, but I suspect at least a good chunk of it would be re-targeted toward startups with long-term viability of their own. In terms of the market manipulation, I'm not saying that just anyone can come along and screw with the public markets. Dell can't manipulate the markets because the company is well-understood and operates in a well-understood market. Pretty much by definition startups are not well-understood and most (though certainly not all) operate in poorly-understood markets (or at least operate differently from incumbents in their markets). This means that startups have a better shot at successfully manipulating the public markets, allowing VCs to get paid even if the company itself doesn't pan out.

rayiner 14y ago

The regulation was more a response to Enron, Tyco, etc, not the dot com collapse.