Dell May Sell Assets to Pay for EMC Deal
An interview in which Marius Haas says there are many ways to pay down a $40 billion debt.
By Arik Hesseldahl Oct 22, 2015, 10:19am EDT
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Assuming its proposed $67 billion takeover of the storage company EMC closes, computing company Dell Inc. will, by this time next year, become the largest company in the world selling information technology gear to large corporations.
So after checking in with Michael Dell, the founder whose name is on the door, it seemed a good time to check in with Marius Haas, the company's chief commercial officer and president of its Enterprise Solutions business unit.
There are a lot of moving pieces to the still-unfolding transaction that will bring not only EMC itself but the many pieces of its federation under the Dell corporate umbrella, and all of them have some bearing on the unit that Haas has run since joining Dell in 2012.
Haas is a former executive at HP who, during a five-year run as senior VP for strategy and corporate development, oversaw some of HP's biggest acquisitions, including the $14 billion takeover of the IT services firm EDS in 2008. He later ran its networking unit and was involved in HP's $2.7 billion takeover of 3Com. After that, he was an adviser to private equity firm KKR.
In an interview with Re/code on Wednesday, he hinted that at least one way Dell will pay down the massive debt it is incurring to acquire EMC — about $40 billion — may be through the sale of some assets. He didn't elaborate on whether Dell might generate cash from outright sales of certain units or float minority stakes in the public markets as it has done with Secureworks.
Re/code: A lot of people were simply surprised by the deal itself, especially because Dell took on so much debt to go private in 2013 and is going back to the debt markets in a much bigger way now. You've spent some time working in private equity and doing M&A deals before this. There's a lot to this deal. What do you think of it?
Marius Haas: The value of having Silver Lake (the private equity firm that co-owns Dell) in the mix is enormous. The creativity they have in crafting financial structures is incredible. We have a lot of respect for their team. A deal this size, you can imagine that most banks are involved. We wanted to make sure we had all the financing secured before we announced anything, and we were over-subscribed.
It looks like after the close Dell will essentially absorb the EMC federation, but will adapt that structure for its own purposes by making it bigger with pieces like Secureworks, Virtustream and Pivotal. Is that how we should think about it? And if so, how does that complicate or enhance your mission here?
If you dissect what has already been published, you will see there is a strong commitment to de-leveraging or paying down the debt very quickly. There are different angles and different levers we can pull to do that. This is why we have such high confidence in what we're doing.
That implies that paying down the debt won't just come by way of cash from operations. Does that mean you might consider selling some assets? Is there anything within Dell that doesn't stay?
We're not prepared to talk about that yet, but it's probably not a bad train of thought.
In buying EMC and going big on the enterprise business, this is in a way a big doubling down on the original thesis for taking Dell private, but doing it in a much bigger way. That puts you right in the middle of all this. How do you see your job changing in the coming year?
I came there to help Michael build a phenomenal enterprise franchise, and — assuming everything happens as planned — we've made a huge step in that direction. EMC is an incredible enterprise franchise, and there are only a few that you can put in that tier. And we've always done a good job building strong and efficient coverage in the mid-market. When you put those things together, you end up with a portfolio that spans pretty much anything a customer might need. … If we're not the most critical partner for every customer on the planet, we'll be in the top tier and asked to participate in almost every conversation they'll have.
Let's talk about the potential for overlap. The way I understand the combination, Dell has Compellent, which I see as storage for the middle tier of the market, while EMC tends to carry more industrial-grade storage. How do you see them fitting together?
Before this deal, we purposefully did not go after the ultra-high end of the storage market, because we know that a frontal assault on a competitor like EMC with limited resources would not have worked. We decided to go after customers in the lower price bands, say $50,000 and below, and we made that a big part of our business. … EMC does really well in the business tiers above that so you can see how they really complement each other nicely.
Let's assume you were back at HP for a moment. They've said you're going to be distracted by getting this transaction done. When they announced they were going to split, we heard similar comments from Dell that HP was going to be distracted. You've played this card against each other. Are you going to be distracted?
The No. 1 priority for me is making sure that there are no disruptions for our customers. The nice part about it is that customers who might not have been opening the door for us are now a lot more interested because they want to understand what the combination is going to mean. On the HP side, Meg Whitman said in 2013 that taking Dell private was gong to create chaos. We executed well and we're taking share away from HP across the board. We don't talk much about them, but I think they've got their own fair share of challenges.
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