Dell Technologies officially unveiled today the pending sale of its cloud-based platform business Boomi to a pair of private equity firms in a deal valued at a whopping US$4 billion.
The deal comes as Dell is now in full transition mode around reshaping the company’s broad and vast portfolio which includes servers, storage, hyperconverged infrastructure, PCs, cybersecurity and various software products.
Global investment firms Francisco Partners and TPG Capital entered into a definitive agreement with Dell on Monday to buy Boomi. Although official financial terms of the deal were not disclosed, the cash transaction is valued at US$4 billion with expectations to close by the end of 2021.
CRN breaks down four key reasons why Dell Technologies is selling Boomi.
The new Dell Technologies is taking shape by focusing on ‘high-priority areas’
It’s been no secret that Dell Technologies is both shedding and doubling down on certain parts of its portfolio of companies since it acquired EMC and VMware in 2016. With the global COVID-19 pandemic driving Dell PC sales to new heights while also accelerating businesses’ hybrid cloud strategy, Dell CEO Michael Dell has decided that Boomi won’t be part of the post-COVID-19 Dell Technologies world.
“For us, we’re focused on fueling growth by continuing to modernize our core infrastructure and PC businesses and expanding in high-priority areas including hybrid and private cloud, edge, telecom and Apex. All designed to help organisations thrive in the do-from-anywhere economy,” said Jeff Clarke, vice chairman and chief operating officer of Dell Technologies in a statement today regarding the sale of Boomi.
Less than two years ago, Dell Technologies’ family of businesses included Boomi, Dell, Dell EMC, Pivotal Software, RSA, SecureWorks, Virtustream and VMware – all operating mostly independently of each other.
With the sale of Boomi later this year, Dell will have sold or spun off four of its eight businesses by the end of this year.
In 2020, Dell sold its cybersecurity business RSA for over US$2 billion to private equity firm STG Partners. Pivotal Software was sold to VMware for US$2.7 billion in late 2019. Then last month, Dell officially announced it will spin-off its 81 percent majority stake in VMware in 2021 to Dell shareholders that would make VMware an independent company.
By 2022, Dell Technologies will consist of its PC business Dell, leading hardware infrastructure company Dell EMC, SecureWorks for cybersecurity, and Virtustream for cloud software and services.
Dell’s US$29 billion core debt
Dell has been financially hindered by a massive amount of debt stemming from its historic US$67 billion acquisition of EMC and VMware in 2016. Each quarter, Dell pays down billions on its core debt, including US$2.4 billion during its most recent fourth fiscal quarter 2021.
As of February 2021, Dell’s core debt stands at roughly US$29 billion with subsidiary debt of nearly US$5 billion.
Although official financial terms of Dell’s sale of Boomi were not disclosed, the cash transaction is valued at a whopping US$4 billion. Dell will likely use a sizeable portion of the funding gained from the sale of Boomi to pay down its large debt as part of its long-term strategy to receiving an investment-grade rating.
“We will continue to prioritize debt pay-down as part of our capital allocation strategy, and we are confident in our path toward an investment-grade rating,” said Dell Technologies Tom Sweet, executive vice president and chief financial officer, during the company’s most recent fourth quarter earnings call.
As part of the Dell-VMware spin-off deal, VMware will pay a special cash dividend of between US$11.5 billion to US$12 billion to the company’s shareholders, which will include around US$9.5 billion for Dell Technologies. Dell is expected to use this injection of cash to pay down its debt.
Boomi doesn’t fit into Dell’s future with project apex
For one reason or another, Michael Dell and his company did not think Boomi fits into its vision for Project Apex which will change Dell’s go-to-market and sales motion. It is interesting because Boomi’s data intelligence and cloud migration focus appears to fit into Dell’s technology wheelhouse, but apparently not with Project Apex.
First unveiled in October, Project Apex is Dell’s new consumption-based as-a-service strategy of the future. Project Apex aims to simplify how customers and partners access Dell’s as-a-service capabilities across storage, servers, networking, hyperconverged infrastructure, PCs and architectural offerings. It unifies the company’s as-a-service and cloud strategies, technology offerings and go-to-market efforts, providing a consistent experience wherever a workload runs including on-premises, at the edge or in public clouds.
Boomi, which was purchased by Dell in 2010, is a provider of intelligent use of data on its cloud-based platform as-a-service (iPaas) architecture. The Chesterbrook, Pa.-based company has more than 15,000 global customers that leverage the technology to discover, manage and orchestrate data.
It is key to note that CRN predicted last week that Dell would make a big splash this week around Project Apex during Dell Technologies World Digital Experience 2021 from May 5 to May 6.
Dell focused on PCs as sales reach all-time highs
There’s no question that the global COVID-19 pandemic is causing skyrocketing PC demands both in North America and overseas as the new remote workforce and remote learning worlds continue to take shape. Dell’s Client Solutions Group (CSG) – which includes desktop PCs, Chromebooks, notebooks, thin clients, printers, monitors and accompanying software and security – is hitting all-time highs.
Revenue from Dell CSG generated a record breaking US$13.8 billion in its recent fourth quarter 2021, up a 17 percent year over year. Dell shipped a record 50.3 million PC units in calendar year 2020, up 8 percent compared to 2019. This record shipping and sales growth was driven by US$9.9 billion in commercial revenue, up 16 percent year over year, along with US$3.8 billion in consumer sales, representing an increase of 19 percent.
With PC demand literally off the charts, Dell is looking to focus major R&D and innovation efforts in 2021 and beyond in its CSG business, not Boomi.
When asked if PC sales could potentially decline in 2022, Michael Dell told CRN that he’s bullish on CSG growth this year.
“We believe the PC demand environment will continue to improve, it’s already off to a strong start,” Dell told CRN in March. “It used to be that you would leave your house to go to work or to school or to the store or to entertainment. Now, people have – even as we can now see the other side of the pandemic – people have learned behaviors of the new digital world. It’s work from anywhere, do from anywhere – that world is here to stay. I believe the available opportunity for us is expanding.”
Dell said there’s still millions of children who still need PCs for school. “We estimate 16 million in the United States alone don’t have either the right device or right kind of access,” he said. “There will be great opportunities continuing this year and beyond. We continue to invest in innovation, and we’re focused on the whole workforce enablement, but also technologies like cloud, 5G, AI and all of that gives people much greater flexibility to work and play from anywhere.”