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Pivotal CEO Rob Mee Talks Michael Dell and Cloud on IPO Day

April 20, 2018, 9:07 PM UTC

Business software company Pivotal held an initial public offering on Friday, raising about $555 million in the process.

The company is a subsidiary of Dell Technologies along with data center software maker VMware (VMW) and cybersecurity firm SecureWorks (SCWX). VMware and Pivotal came as a package deal when Dell acquired data center technology giant EMC for $67 billion in 2016.

But Pivotal CEO Rob Mee wants to clear up any confusion that Dell’s majority ownership gives his company deep pockets. It is a misconception he heard during the run up to Pivotal’s public market debut, when some investors asked, “You can just get money from Michael Dell at any time, right?”, a reference to Dell’s CEO and founder.

The answer, of course, is no, Mee said. “It’s not an environment where you can snap your fingers and get money.”

“Michael Dell is extraordinarily frugal,” he continued. “It’s not a mistake he’s one of the richest people in the world.”

Pivotal’s first day trading on Friday was a modest success with the company’s shares popping over 11% when the market opened before retreating to a 4.9% gain to $15.73 at the closing. Unfortunately for Pivotal, the company’s first day of trading coincided with a poor day for tech stocks (NASDAQ fell 1.3%).

“I was just talking to my CFO who said, ‘Oh, this was sort of a tough day to go public,’” Mee said. “But, you know, we’re doing okay.”

Pivotal’s IPO comes as a number of other enterprise technology companies go public, a change from the relatively slow drip over the past few years. Online storage and workplace software company Dropbox went public in March, followed by enterprise software company Zuora in April. DocuSign, which makes electronic signature software, filed its paperwork in late March, and will likely hold its IPO in the coming weeks.

Pivotal’s bankers explained to Mee that the general dearth in IPOs in recent years has created a pent-up demand among investors for enterprise software IPOs. And what the companies that are holding IPOs have in common, however, is that they are all unprofitable.

“We’re no different,” Mee acknowledged.

Pivotal is starting to trim those losses while growing sales. In 2018, it lost $163.5 million, a 30% decline from the $232.9 million it lost the previous year. Its sales grew 22% year-over-year in 2018 to $509 million.

“I think people looking at our financials should be comfortable,” Mee said.

Although Mee co-founded Pivotal in 1989 as a software development consulting firm, its modern business can be traced to 2013 when EMC acquired it and, with VMware, spun it out. Pivotal still provides consulting services, but it also now sells software that coders can use to build complex apps that run on both internal data centers and those of cloud computing providers like Microsoft and Amazon (AMZN).

Mee concedes that Pivotal is a bit misunderstood. Some investors mistakenly think it’s merely a Dell company and not an independent business that’s free to do deals and partnerships with Dell competitors.

For example, Microsoft (MSFT), a Dell rival, is also a Pivotal investor and partner on sales deals, Mee said, underscoring the company’s independence. Dell and VMware (VMW) do not operate cloud-computing services (VMware officially shuttered its public cloud service in 2017), but they sell software and hardware intended for companies to build and operate their own data centers, two lines of businesses threatened by cloud computing companies.

In order to grow, Pivotal must ensure that its technology can run on any cloud computing environment as well as internal data centers, so that it’s truly “infrastructure agnostic,” Mee said.

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Michael Dell has no intention of exercising control over Pivotal and determining which companies it can partner with, Mee explained.

Although “Michael is very, very supportive,” Mee said, “We operate quite independently.”