Dell is returning to the public market after a 5-year stint as a private company to diversify beyond its primary revenue stream (computer hardware).
Michael Dell built the company he started in his dorm room into the world’s largest computer-maker by the mid-2000’s. But, by 2013, Dell had slipped behind HP and Lenovo. Unhappy with bronze, Dell decided to take the company private for $25B.
Outside of public market scrutiny, Dell revamped its non-hardware offerings, buying data storage company EMC Corp for $67B in 2016.
To finance the historic acquisition, Dell issued a tracking stock (a stock issued by a parent company to mirror, or “track,” a smaller subsidiary while the original company undergoes a facelift) for its subsidiary, VMware.
Over 5 years, Dell succeeded in diversifying its software offerings to become a one-stop computing shop for businesses. But in doing so, it racked it up $52.7B in debt as of last quarter.
To make up for the cash shortfall, Dell had to return to public markets. They bought their own tracking stock for $21.7B — allowing for tight control and outside investment — and now, Dell and VMware will operate more independently.