Microsoft May Invest in Dell To Help It 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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  • 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.
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  • 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
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  • 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.
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