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November 3, 2015

Pivotal May IPO Early with Dell’s Blessing: Report

The big data implications of Dell’s acquisition of EMC (NYSE: EMC) got a little more interesting this week when it was reported that Pivotal may be spun out and have an initial public offering (IPO) of stock in early 2016.

According to a story in Re/code, Dell and EMC are exploring the option of accelerating Pivotal’s IPO. The company’s executive have spoken about their plans for an IPO before, but apparently the prospect of Dell paying $67 billion to buy EMC—a deal that is financed by an estimated $50 billion in debt–has accelerated those plans.

Pivotal was formed two-and-a-half years ago by EMC when the storage giant spun off its big data business. General Electric (NYSE: GE) later took a 10 percent stake in the company for $105 million, giving it a valuation of more than $1 billion in 2013.

In early 2015, Pivotal abruptly changed its big data strategy when it announced a strategic partnership with onetime rival Hortonworks (NASDQ: HDP) in which it would essentially cease development of its own Hadoop distributin, called Pivotal HD, and back Hortonworks’ distribution, called HDP. It also announced that it would make key big data products, such as GemFire, HAWQ, and Greenplum, available as open source.

In addition to its Big Data Suite and related services, the company also develops its Cloud Foundry, which aims at accelerating enterprise’s move to developing and running business applications in the cloud.  The businesses are about equal in size, according to EMC’s regulatory filings.

The plan that Dell and EMC execs are mulling reportedly calls for Pivotal to sell about 20 percent of its equity in an IPO, which would raise approximately $1 billion to $1.5 billion, according to a separate report in Fortune. That would value Pivotal—which brought in $118 million over the first six months of 2015, according to EMC’s regulatory filings–at around $5 billion. That’s probably too high.

Dell expects to close its acquisition of EMC in the second half of 2016. If it goes through—and it appears likely barring unforeseen events—it will be the largest technology industry deal of all time.

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Pivotal Throws in with Hortonworks and Open Source