Dell Technologies Inc. is reportedly mulling over the idea of becoming a publicly traded company once again, less than five years after it bought out shareholders to go private.

Sources including Bloomberg and the Wall Street Journal cite people familiar with the matter as saying that Dell is “considering strategic options” that include an initial public offering as it seeks to raise funds to pay off debt it incurred in going private. It currently has more than $50 billion in debt, on which it’s paying $2 billion in interest payments annually.

Dell’s board is set to hold a meeting this month in order to discuss possible options, but may hold off on making any decisions for the time being, the people said.

Dell has undergone a huge transformation since founder and Chief Executive Michael Dell (pictured) decided to take the company private back in 2013. That move was designed to help Dell accelerate its strategy of becoming a larger supplier of hardware and software for enterprises away from the spotlight of shareholder scrutiny that public companies face. Dell stepped up its enterprise game in dramatic fashion in 2016, when it bought out storage giant EMC Corp. in a massive $67 billion deal, the largest takeover in the tech industry to date.

But in order to finance that deal, Dell was forced to take on debt of around $46 billion, of which $4.35 billion is due to be paid off next year. The company also has other loans outstanding, Bloomberg said.

An IPO could therefore help to raise cash to pay off some of that debt, Bloomberg said. The new tax bill Congress passed at the end of last year caps companies’ ability to deduct interest expense from their taxes at 30 percent of earnings before interest, taxes, depreciation and amortization, the Journal noted.

“The threat of rising interest rates has always been looming and could be heightening pressure to raise more cash,” said Dave Vellante, chief analyst of the research firm Wikibon, owned by the same company as SiliconANGLE.

Less debt, more acquisitions?

Dell may also be keen to pay off its debts quickly so it can free up funds to finance further acquisitions, Vellante added. “With its debt service, Dell can’t be as aggressive as it would like with acquisitions which could help with its growth,” he said.

“It’s apparent that some kind of M&A activity is going on,” agreed Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, but he said it’s not yet clear what the nature of an acquisition would be.

Still, an IPO at a time when some observers wonder how much further the market can rise could be dicey. “It’s a risky venture to bet on equity doing what it has done for the past year and Dell would have the same challenge convincing the street it’s worth a whole lot more,” said Moorhead.

Another possibility Dell is considering besides the IPO is a public share sale of Pivotal Software Inc., a subsidiary of Dell that sells cloud computing products such as the Cloud Foundry platform for building cloud-native software applications. Bloomberg said this possibility was first discussed last year, with Pivotal being valued at between $5 billion and $7 billion.

Holger Mueller, principal analyst and vice president of Constellation Research Inc., said the current high stock market valuations of technology companies means that both options are an attractive prospect for Dell. However, he said customers would do well to ask what implications this could have on Dell’s ability to continue its transformation.

“For CIOs making decisions on IT infrastructure, it shouldn’t make a difference what Dell will do, but the smart ones will ask if it can pursue the necessary transformation to its offering portfolio as well and as fast as a public company as it was able to do as a private company,” Mueller said.

The cash raised from an IPO or the sale of Pivotal shares could also be used to buy the remaining shares of VMware Inc. that Dell doesn’t currently own. At the time of the EMC deal, it was reported that Dell owned around 80 percent of VMware’s stock, with the remaining 20 percent continuing to be publicly traded.

News of the potential shakeup at Dell comes just hours after the company announced a major reorganization of its Infrastructure Solutions Group. Dell announced Thursday that it’s disbanding the Converged Platforms and Solutions Division of the infrastructure group as part of the reshuffle, which also sees several Dell veterans gain more influence at the expense of former EMC executives. “The reorg will help streamline the legacy EMC business and shore up the income statement,” Vellante noted.

Photo: SiliconANGLE