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Microsoft May Invest in Dell To Help It Go Private

By - Source: BusinessInsider | B 17 comments

Microsoft may invest up to $3 billion in Dell to help to company go private.

CNBC's David Faber reports that Microsoft may make an investment in Dell to help the latter company go private. Unnamed sources claim that Microsoft may invest between $1 billion to $3 billion USD, and is currently in talks with Silver Lake, the main sponsor behind the leveraged buyout, and Michael Dell who are currently working on the deal to go private.

Faber said that Microsoft's investment would be "mezzanine" financing, or rather debt that converts into equity if the debt isn't paid back within a specific timeframe. Faber also mentioned preferred shares which means the loan could convert into preferred shares of Dell at a certain point.

He also gave an update regarding the talks between Michael Dell, Silver Lake and the special committee formed by Dell shareholders, reporting that talks continue and a deal could be made by the end of the week. Pricing is still an issue, and last week reports claimed that the potential window was between $13 and $14 per share.

Faber points out that Microsoft has a lot at stake, as Dell is one of its biggest customers. Thus, it's not surprising that Microsoft would want to help its Windows partner so that the relationship continues to prosper. Dell of course is not only one of Microsoft's largest clients in the consumer division, but the enterprise sector as well – the latter probably more so than the former.

But Dell is looking to reinvent itself by going private. If Microsoft becomes a potential investor, then the Redmond company may have some influence over Dell's business which in turn could hamper Dell's ability to seek out a new business model. On the Microsoft front, it may face a serious backlash from its other Windows partners including the very vocal Acer, Asus, HP and others if it does indeed invest in Dell

David Faber's report on CNBC can be seen in full here.

 

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  • 4 Hide
    hedwar2011 , January 23, 2013 12:12 PM
    I used to work for this company and it doesn't surprise me at all that they are trying to go back to private. When they emerged in the box chain stores it really put a nail in their casket for the private label PC business. Moving 90% of their support services for consumers was also the next nail that went into that casket, granted they did so thinking they would save costs associated but it only made the problem worse with the "robot" like support agents and the lackluster care and support of the agents that were assimilated into the family.
  • 1 Hide
    back_by_demand , January 23, 2013 12:15 PM
    Quote:
    it may face a serious backlash from its other Windows partners including the very vocal Acer, Asus, HP and others

    Are those the same very vocal companies that have stabbed Microsoft in the back at the first opportunity and gone Android? The ones that have got access to a Windows tablet OS but produce piss-poor hardware and publicly diss Microsoft?
    ...
    With friends like those, who needs enemies?
    ...
    We are starting to see companies act like real people, rather than faceless entities, Apple trashes Samsung, so they tell Apple to get bent on contract for processors, screens, etc - just as the Octacore and flexible screens arrive
    ...
    So now we have a company that has been a staunch ally of Microsoft in consumer and commercial sectors, even in the lean times - so who is Microsoft going to invest money with? Not the asshats that badmouth you in public for sure
  • 2 Hide
    godfather666 , January 23, 2013 12:21 PM
    Microsoft should just buy Dell and vertically integrate. Get rid of Dell's low-end business, focus on high-margin enterprise and consumer PCs and services. And improve Dell's crappy customer service.

    Yeah, that will surely enrage its partners, but you have to be bold to survive, and the tech world is changing quickly. Let's face it; all these companies: Acer, Asus, HP, Dell, etc.. have done incredibly little in the way of innovation over the past 10 years. And Apple has really demonstrated the benefits of vertical integration.
  • 0 Hide
    chicofehr , January 23, 2013 12:27 PM
    As long as they allow Dell to continue to use Windows 7 long after just as they did with Windows xp. Don't feel like installing several shell programs to give the windows 7 feel. Anyway, Dell is a good brand so I wish them all the best. I hope they reduce the price of their 30" monitor so I can buy one someday. 1080p is killing me!!!
  • -2 Hide
    RazorBurn , January 23, 2013 12:29 PM
    I don't really care if this Company will buy this company, all i really want is more innovation and forward thinking..
  • 4 Hide
    calmstateofmind , January 23, 2013 12:42 PM
    RazorBurnI don't really care if this Company will buy this company, all i really want is more innovation and forward thinking..


    Well that kind of stuff doesn't happen unless this kind of stuff happens.........
  • 1 Hide
    matt_b , January 23, 2013 12:43 PM
    Both private and public have their advantages and disadvantages. With that being said, I find that private companies generally have the best products and service because there are no "dollar-first" share holders to appease with bottom line net profits. That is to say, both quality and good service-oriented companies are severely scarce these days......
  • 0 Hide
    azraa , January 23, 2013 12:48 PM
    Heck, I never even knew Dell wasn't a private capital.

    And as said above, both private and public sectors have advantages, associated with the power of the money, but then again, Dell (in my eyes, please note this) has not done so well in the last time. I mean their monitors are great and their laptops are good but not anywhere top of the line, except some of their premium branded business ntbks and their Alienware line
  • -1 Hide
    ewood , January 23, 2013 12:57 PM
    matt_bBoth private and public have their advantages and disadvantages. With that being said, I find that public companies generally have the best products and service because there are no "dollar-first" share holders to appease with bottom line net profits. That is to say, both quality and good service-oriented companies are severely scarce these days......


    you're joking right? you genuinely think people who invest in public companies are not "dollar first" share holders but those who invest in private companies are? I fail to think of one instance where this is true and can think of many where the opposite is, in fact, true.
  • 0 Hide
    ithurtswhenipee , January 23, 2013 1:01 PM
    I hope that MS isn't trying to go apple on us with another walled garden.
  • 1 Hide
    jabliese , January 23, 2013 1:10 PM
    3 billion??? Makes the 150 million Bill put into Apple a real bargain.
  • 0 Hide
    Anonymous , January 23, 2013 1:36 PM
    And the M$ death star is complete!, Look out Alderaan!
  • 1 Hide
    chewy1963 , January 23, 2013 1:59 PM
    ithurtswhenipeeI hope that MS isn't trying to go apple on us with another walled garden.


    How can you look at Windows 8 and NOT think MS is trying for a walled garden? Why else would they force that ridiculous UI formerly known as Metro onto desktop users if that wasn't the case?

    It reminds me of the Gatoraid ad campaign 'Be Like Mike'... Only MS seems to want to 'Be Like Apple'.
  • 1 Hide
    DRosencraft , January 23, 2013 2:37 PM
    As we've seen through the latest numbers for last quarter, Dell is in a steep decline. I think they had a 20% decrease compared to the same quarter the year before. They were once a promising company. We all remember the "Dude, you're getting a Dell" days. Were they absolutely the top notch manufacturer, of course not, but they did deliver a computer you didn't feel queasy owning. The power of having a private company is that you can run it the way you want. You don't have shareholders to answer to. So they can go back to their old model, which may not be as streamlined as the market wants, but delivers like the company needs and consumers want. They only have to worry about paying back debts, not meeting some imaginary goal line or expectation placed by the market. There's less profit, and admittedly less accountability, but it would seem that going public was not what the company needed in the long term.
  • 2 Hide
    matt_b , January 23, 2013 2:57 PM
    ewoodyou're joking right? you genuinely think people who invest in public companies are not "dollar first" share holders but those who invest in private companies are? I fail to think of one instance where this is true and can think of many where the opposite is, in fact, true.


    You got me, I was thinking ahead as I typed it out; corrected.....

    With most private companies, things run smoothly as long as the leaders of the company are making a profit and doing things in an efficient and sensible way. It's mostly funded by the same people that run it and the stakes for them are higher so there's a lot riding on trying to make all the right moves. When you turn a company into a publicly-traded one, then the fact that every move and decision made has the micromanaging vote of thousands of share holders and their money. If things go south, this is where the "golden parachute" term stems from the most because they have been playing with other people's money and bad decision-making at worst, means out of job. The main goal for either type of company is obviously to make as much as they can as far as net profit is concerned. Too many publicly-traded companies cut costs in areas just for the sake of improving their bottom-line for the shareholders (while forgetting the consumer at times) that much more. In turn, they end up sacrificing long-term public image for short-term dividends more often than not..
  • 0 Hide
    jhansonxi , January 23, 2013 4:16 PM
    ithurtswhenipeeI hope that MS isn't trying to go apple on us with another walled garden.
    Walled? Yes. Desert, slum, or garden? That is the question.
  • 0 Hide
    alidan , January 23, 2013 11:27 PM
    back_by_demandAre those the same very vocal companies that have stabbed Microsoft in the back at the first opportunity and gone Android? The ones that have got access to a Windows tablet OS but produce piss-poor hardware and publicly diss Microsoft?...With friends like those, who needs enemies?...We are starting to see companies act like real people, rather than faceless entities, Apple trashes Samsung, so they tell Apple to get bent on contract for processors, screens, etc - just as the Octacore and flexible screens arrive...So now we have a company that has been a staunch ally of Microsoft in consumer and commercial sectors, even in the lean times - so who is Microsoft going to invest money with? Not the asshats that badmouth you in public for sure


    All very good reasons but I really don't think Microsoft cares.
    Can this way Microsoft wants to make its own hardware, who better to make their hardware with than a hardware manufacturer. Microsoft gives him the specs they make their hardware, I don't really see this as a you had our back we got yours I see this more as a business decision.
    From what I remember in the past Dell's main problem is cutting corners on their power supplies, and overall motherboards. In times when we were basically all have discrete GPU's, they didn't offer your slot in it unless you already bought one with a discrete GPU already installed.
    The power supplies would probably die out for this computer as a whole would die out, and the motherboard generally didn't allow you at all to have an upgrade path.
    If Microsoft buys them "helps them" and they have any say in the company at all I could really see Microsoft offering up a very good consumer computers through Dell, even offering up very decent phones and tablets with the production lines to back up their desires for higher-quality products.