Dell goes private: 10 big unknowns

Dell has gone private courtesy of a leveraged buyout via CEO Michael Dell and Silver Lake Partners and now the company is free to reinvent itself without Wall Street moaning. But let's get real here: Dell as a private company isn't a slam dunk.

Under the terms of the deal, Dell shareholders get $13.65 a share in cash for each share. The total transaction is $24.4 billion. Michael Dell owns 14 percent of Dell shares and will stick as CEO.

CEO Dell said:

I believe this transaction will open an exciting new chapter for Dell, our customers and team members. We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise. Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision.

The good news for Dell is that it won't be on the quarterly treadmill. The bad news for Dell is that private equity and leveraged buyouts can be a new ballgame.

Dell goes private for $24 billion | Will Microsoft's $2 billion role in Dell's buyout play out like its Nokia partnership?

What an IT buyer may see as Dell goes private

• FUD from rivals such as HP on servers and PCs.
• Account management changes. 
• Shifts in messaging. 
• A more aggressive shift to pitching software and services. 
• Strategic changes to the PC sales approach. 

Here are the big unknowns about Dell's new chapter:

1. Can Michael Dell work with Silver Lake? As a public company Dell had to wince and deal with analysts, shareholders and investors. When times are good, Dell was a superstar. Unfortunately, Dell's quarters haven't been great for years. As a private company, Dell will work with Silver Lake, which can show up and want results whenever it wants. Will the new boss be better than the old boss?
2. Dell will have more debt. Note how Microsoft's investment is deemed a loan. Private equity deals are all about financing and Dell will be more leveraged. Dell will lose some of its flexibility when it has to pay debt and private equity dividends. Just like your household budget, debt can ultimately limit your options.
3. Will Dell keep acquiring? For Dell to transform it will have to make acquisitions. Without equity, Dell will have to pay cash. That cash will either come from more debt or operating results. Dell's shares weren't much of a currency anyway, but now they aren't an option at all. Another issue: Will upstarts want to be acquired without any equity upside?
4. How much patience will Dell require? Dell's transformation from a PC maker to cloud and enterprise software and services company akin to IBM will take time. It's unclear whether Silver Lake will be much more patient than Wall Street. A five-year time horizon is one thing. A decade turnaround is another ballgame entirely.
5. Can Dell hone its messaging? Dell's messaging and marketing as a public company has been muddled. When companies go private they can fall off the radar. Dell will have to avoid that trap and improve its message to IT buyers.
6. Will IT buyers lose their Dell contacts if sales and support are turned over? Going private often results in turnover and restructuring. That turnover can be disruptive for IT buyers who are used to dealing with the same account managers for years. 
7. How will Dell's partnership with Microsoft work? Microsoft floated Dell a $2 billion loan to help finance the buyout, but doesn't own a stake. What will Microsoft need in return? The short answer is probably manufacturing capacity for Microsoft's hardware. The wild card is whether Microsoft's hardware partners will be wary of the Dell deal. Microsoft has structured its loan in a way where it can balance all sides.
8. How will competitors pounce? Dell's buyout is likely to result in a round of fear, uncertainty and doubt from rivals such as IBM and HP. It'll be interesting to watch whether Dell can take the assault.
9. Will Dell stay in the consumer PC business? Now Dell is private, it is free to abandon consumer PCs. The big question is whether Dell will follow through. The unit generates revenue, but operating income is just above breakeven.
10. Can Dell figure out mobility as a private company? Dell has to solve for mobility, tablets and maybe even smartphones. That expertise may be lacking whether Dell is private or public.