To many, it may not make sense for Microsoft Corporation (NASDAQ:MSFT) to make a loan to Dell Inc. However, this is exactly what the company plans on doing.
In short, Dell needs the money so its founder can buy back the company.
While this sounds like a great story, you are probably thinking one thing: why does Microsoft Corporation (NASDAQ:MSFT) need to get involved?
Simply put, it doesn’t want anything bad to happen to Dell as the company continues to fight back advances of Google Inc.’s Android operating system. In other words, Microsoft needs Dell to be in good health to ensures its lead in the operating system market.
Here is a recent excerpt from a Reuters article:
“Microsoft Corp is playing defense with a $2 billion loan to help Dell Inc's founder buy back the world's No.3 PC maker as it seeks to shore up support for Windows and beat back the march of Google Inc's Android.”
“The investment in the landmark $24 billion buyout led by Michael Dell marks the latest step in Microsoft's plan to gain more influence over the hardware supply chain - a departure from the decades-old, software-centric philosophy that helped it dominate the computing world but is now increasingly under threat.”
On the surface, this looks like a good idea for Microsoft Corporation (NASDAQ:MSFT). Obviously, the higher-ups at the company believe this to be the case.
However, there is one thing to consider: is Microsoft going to alienate other computer manufacturers while trying to get closer to Dell?
In the same Reuters article, Andrew Bartels, an analyst at Forrester Research shares his opinion:
“It doesn't mean it's a bad move, but it's definitely defensive. Microsoft is realizing it must be much more engaged in the hardware business than it used to be, it needs to be making bets and forming relationships.”
If forming relationships is what Microsoft Corporation (NASDAQ:MSFT) is trying to do, it is safe to say that a $2 billion loan is a great place to start.
DISCLOSURE: I have no positions in any stock mentioned.
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