Why is Dell really dropping its assets? To fund its EMC acquisition
#Dell is cutting its losses with its sale of @DellSoftware Group, according to a Technology Business Research white paper, titled ‘Selling the Software Group makes strategic and financial sense for #Dell and its partners’.
The white paper details how @FranciscoPartners and @ElliottManagement are acquiring all #DellSoftware Group brands – Except #Boomi, for what TBR estimates to be between $3-4 billion.
Several years ago Dell acquired a range of assets for its portfolio, including #Quest Software, a transaction worth $2.4 billion in 2012. Now, however, Dell has decided to drop its Software Group assets. Dell has also relinquished control of @DellServices, which will be acquired by @NTTDATA.
The reasons behind this are largely due to revenue. In 2014, Dell Software Group’s revenue grew 13.9% annually, but in 2015 this decreased to 8.8% annually to $1.4 billion.
Dell’s strategy is to drop its non-core assets, in order to gain financing for its planned acquisition of EMC.
At the end of 2015, TBR reports that Dell also started cost-cutting measures, including reorganisation of its four core product groups: Boomi, Security, Statistica and Systems and Information Management.
Even with this, its Q1 2016 revenue stayed flat at $334 million, while its operating margin grew to its most profitable quarter on record of 8.4%.
TBR predicts that Francisco Partners and Elliott Managements’ probable strategy will build on the profit coming from its margin and use this to implement more cost-cutting. They will also seek to position Quest Software and SonicWall as independent brands – which should be relatively efficient as their previous sales, marketing and partner programmes prior to Dell’s takeover are ‘relatively intact’.
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