The Performance Beacon

The web performance, analytics, and optimization blog

Going Private is the New Black

Written by Tom Lounibos

February’s announcement of Dell’s move to go private got me thinking. The deal, put together by Michael Dell and Silver Lake Partners, is potentially worth $24.5 billion or more depending what type of impact disgruntled investor and take-over czar Carl Icahn has on its negotiations.

In the meantime, BMC has announced and closed a deal with two private equity firms worth $46.25/share in cash or $6.9 billion.

Who will be the next tech company to close the curtain on public investors … Compuware, CA or even HP? And why the move to go private?

GigaOM tells us that cloud is the disruptive force at work:

As more companies evaluate the economics of putting workloads on massive webscale infrastructure — outside their walls — they will buy far fewer servers and routers themselves. And as more corporate applications are delivered via software-as-a-service models there are fewer huge upfront software licensing deals. Instead payments are spread out across a year or three. There is also pressure on the massive enterprise service and maintenance fees favored by companies like Oracle.

“There’s a seismic shift afoot with enterprise software vendors as they move from traditional pricing and distribution models to OpEx, SaaS and cloud models. This means a financial disruption for many of them, not just BMC Software,” said Dana Gardner, principal analyst with Inter-Arbor Solutions and GigaOM PRO analyst.

Seismic shifts in tech seem to be a continuous exercise. This particular shift, driven by an ever-growing mobile / social world, is of such an EPIC proportion that even industry veterans have never seen one like it before. Disruption is being experienced at every layer (User, Device, Network, Infrastructure) of the technology stack. This means that these are not good times for the incumbents (public vendors) whose technology and business models are showing their age. They will need to evolve or die, and evolution is best done in private. Innovation can be a messy business for even the most confident investors. It has many highs and lows, which makes it difficult to be watched by a glaring public eye. And so going private has become the new black in tech.

Nor is it just Dell and BMC. Other companies such as Compuware, HP, IBM, Oracle and Microsoft have angry shareholders who are unwilling to face the fact (or do not yet grasp) that the evolving product set and buying pattern means that profitability models are shifting, too.

Nor is it just tech. Berkshire Hathaway and 3G Capital are spending $23 billion to acquire HJ Heinz Co. in what is thought to be the largest acquisition in food industry history. Best Buy and Barnes and Noble have been mentioned in the press as considering going private.

What does this shift to private mean for all the newly minted private tech companies that dream of someday going public? Time will tell, but one thing I’m sure of in tech is that those who innovate faster typically win!

Brad Johnson

About the Author

Brad Johnson

Brad is a cloud-testing pioneer who joined SOASTA in December 2008. His former roles as head of test and monitoring products at Compuware, Mercury Interactive and Borland prepared him well to disrupt the skeptical and established software quality market with updated approaches and technologies for continuous web and mobile testing.