Dell shares secret staff instructions with SEC

The black art of managing public and investor relations spin has been laid painfully bare by Dell after it revealed communications about how it intends to describe its recent decision to return to a conventional public ownership structure made it into the public domain.

The company has released a document marked “GLOBAL COMMUNICATIONS ADVISORY **NOT FOR DISTRIBUTION**” as a regulatory filing with the United States Securities and Exchange Commission.

It's a move its original authors possibly didn't anticipate would be released to the outside world. But clearly someone inside Dell feels it has to be disclosed to tick all the right regulatory boxes.

And it makes for some good reading too, shedding further light on the reasons for the transaction than some previous pronouncements from the company - which didn’t really reveal why Dell was making the change given that founder Michael Dell often said that being a private company meant it was better able to serve customers.

The SEC Advisory partly answers the glaring question of “Why are we making these changes now?” by saying “Dell Technologies has dramatically transformed its business since the going-private transaction in 2013 and has become the leader in both traditional and emerging technologies”, acquired EMC, spun out Pivotal and SecureWorks and “emerged from this transformation better positioned to quickly respond to the changing IT landscape.”

The question “Why is Dell Technologies doing this?” is answered as follows:

“The transaction achieves several important objectives:

• Simplifies Dell Technologies’ capital structure by eliminating the DVMT stock and, thereby, simplifies Dell Technologies’ ownership interest in VMware.
• Provides current DVMT stockholders with significant and immediate premium to the trading price of the DVMT stock, and the opportunity to receive a new class of publicly traded stock that reflects the entire Dell Technologies family of businesses, enabling them to benefit from potential future value creation of Dell Technologies.
• Gives Dell Technologies more strategic and financial flexibility for future initiatives.
• Maintains VMware’s independence.”

That last point is notable given Dell considered many options including a reverse-merger with VMware.

That the company concluded VMware needed to stand alone re-affirms the belief of many observers that VMware’s ability to work with partners would be impaired if it were tied to Dell’s servers and storage businesses.

The document is clearly intended to communicate carefully structured messaging to Dell staff, and as such is somewhat saccharine.

But it’s also a little revealing, as spokespeople are told to say “to meet the growing demand of customers and partners to buy solutions across Dell Technologies’ family of businesses, we remain committed to simplifying our offerings and making the full customer experience both easier and faster for customers.”

Dell currently sells one of almost everything, a stance that has it offering products that compete directly with each other and/or overlap significantly in fields like hyperconverged infrastructure and storage.

The hint of a simplified portfolio could therefore signal pruning of products.

Staff are also told not to “summarize this complex transaction into a simple statement like ‘Dell is going public’.” Instead they’re allowed to use only the rather obtuse and jargon-heavy paragraph below to describe the deal.

“We are recapitalizing the company by proposing a transaction to retire the VMware tracking stock (DVMT) and replace those shares with a mix of cash and publicly traded Dell Technologies Class C common stock. This transaction will help simplify the company’s ownership structure, but won’t change how we interact with customers or partners, and VMware will remain independent.”