Dell Technologies is set to return to public markets on December 28. In a propaganda campaign ahead of the move, CEO Michael Dell says his company is growing a lot faster versus Cisco Systems, HP Enterprise and IBM. And CFO Tom Sweet claims the move to public markets will catapult Dell forward.
Ironically, Dell's leadership was making similar claims about the value of taking Dell private a few years ago. Fast forward to present day and there's a very basic financial metric that warrants more discussion. It involves net income. Or stated another way: Good, old fashioned profits.
Simply put, Dell Technologies often posts net income losses each quarter, while head-on enterprise technology rivals like Cisco, HPE, IBM and Oracle typically remain profitable.
Two cases in point:
Dell: Paying Down Debt
To Dell's credit, the company has aggressively paid down debt related to the EMC buyout of 2015. Within the past two years, the company has paid down approximately $14.4 billion in gross debt, excluding Dell Financial Services- and subsidiary-related debt, the company said in November 2018.
Generally speaking, big industry rivals like Cisco Systems, HP Enterprise, IBM and Oracle are not growing as quickly as Dell. But those publicly held rivals are generating net income. And that could be particularly important as Wall Street potentially heads into a bear market for 2019.
Instead of growth, critics could increasingly focus on those net income statements, dividend yields, and other financial metrics that allow bears to safely hibernate from market storms.
Dell: Success and Question Marks
Michael Dell and his team certainly deserve credit for successfully merging EMC into the business. And Dell has repeatedly won praise from enterprise and midmarket partners that want to build on-premises data centers.
Still, Dell only recently began to sort through recurring revenue strategies for partners. And Michael Dell's repeated claims that customers are retreating from public clouds to on-premises data centers don't quite match up to market realities.
No doubt, a small percentage of workloads may shift from public cloud settings to private data centers. But every financial metric from Microsoft and Amazon reinforces a simple fact: Revenues for Azure and AWS are growing far faster than sales of on-premises data center gear.
Amid that reality, we'll be watching to see if Dell itself remains in strong growth mode, and whether shareholders begin to demand true profits along with those growth figures...
