Microsoft Might Invest In Dell Buyout - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Infrastructure // PC & Servers
04:24 PM
Connect Directly

Microsoft Might Invest In Dell Buyout

Microsoft is considering investing $1 billion to $3 billion to help Michael Dell take his company private, according to a report issued Tuesday.

Top 10 Tech Fails Of 2012
Top 10 Tech Fails Of 2012
(click image for larger view and for slideshow)
A new report claims Microsoft is in talks with Dell CEO Michael Dell and private equity firm Silver Lake Partners to help take Dell private. CNBC, citing sources close to the matter, said the Redmond, Wash.-based software giant could contribute $1 billion to $3 billion toward the leveraged buyout. Microsoft has yet to comment but the report states that a deal should be finalized by the end of the week.

Speculation about potential buyout partners has been circulating since Bloomberg reported Dell's intentions on Jan. 14. The news followed a rough year for the Round Rock, Texas-based company, which made a variety of noteworthy acquisitions but could not sustain enthusiasm among investors. Even with buyout rumors provoking a momentary rise in Dell's shares, the company's stock was, as of Tuesday afternoon, still down almost 30% relative to its 52-week high of $18.36.

Just over a month ago, the company had positioned Dell World as a coming out party for its new identity as an end-to-end service provider with a competitive software portfolio. Though the transition earned Dell some praise, it didn't stop the company's PC sales from declining sharply, even relative to the depressed overall market.

[ What else might be on tap for Dell in the coming year? 6 Dell Storylines To Watch In 2013. ]

Michael Dell expressed allegiance to the PC business during his Dell World keynote, praising Windows 8 and next-generation form factors as catalysts for a revitalized market. That confidence hasn't yet translated into sales, however, and many commentators have suggested Dell might go private in order to restructure free from scrutiny.

Microsoft has a history of investing in other companies, such as the infusion it gave Nokia as part of the Windows Phone 8 push, and the $150 million bet it made on Apple in 1997. Neither of those investments involved taking a company private, so the situation will be somewhat different if Microsoft supplies Dell the additional equity it needs. Regardless, the interest from Microsoft makes sense, given Dell's status in the Windows sales channel.

"Microsoft's involvement doesn't surprise me," Gartner research VP Steve Kleynhans said in a phone interview, noting that Dell is "a really big customer" and that Microsoft would probably value "a little bit of insight and control over whatever restructuring might take place."

As for Dell's motivation, Kleynhans echoed suggestions that Michael Dell is looking to restructure his company without Wall Street's watchful eyes. "It's the typical reason you take a company private," he remarked.

Regarding the sorts of post-buyout moves Dell might make, Kleynhans cautioned that one can only speculate. Nevertheless, he expressed that PCs are likely to remain a meaningful part of the plan. He noted that although few of Dell's purchases have targeted PCs directly, several, such as KACE and Qwest, "have a big play on PCs." He said the company's new PCs have remained competitive, despite slow sales, and that the market remains "a big viable, business."

As to whether a Microsoft-Dell pact might trouble other PC makers, Kleynhans said, "It's all how they structure it." When asked, he agreed that the Surface tablet had likely caused "some friction" in Microsoft's relationships, as the device was widely interpreted as a criticism of OEM products or a new force that would eat into those OEMs' sales. Nevertheless, he noted that Microsoft has invested in many companies without controversy. He also suggested that because "nobody seems to have done terribly well with Windows 8 tablets in the fourth quarter," most companies are probably focused internally on solutions, rather than "finger-pointing with competitors."

Attend Online Marketing Summit San Diego, Feb. 11-13, and gather the insights and strategies you need to make the right online marketing choices to deliver the most value for your business. OMS San Diego offers three days of inspiration, connections, and practical learning.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
Think Like a Chief Innovation Officer and Get Work Done
Joao-Pierre S. Ruth, Senior Writer,  10/13/2020
10 Trends Accelerating Edge Computing
Cynthia Harvey, Freelance Journalist, InformationWeek,  10/8/2020
Northwestern Mutual CIO: Riding Out the Pandemic
Jessica Davis, Senior Editor, Enterprise Apps,  10/7/2020
White Papers
Register for InformationWeek Newsletters
Current Issue
[Special Report] Edge Computing: An IT Platform for the New Enterprise
Edge computing is poised to make a major splash within the next generation of corporate IT architectures. Here's what you need to know!
Flash Poll