Microsoft Corporation (NASDAQ:MSFT) has had an effective enterprise and corporate-customer relationship with Dell Inc. (NASDAQ:DELL) over the years, which has helped both companies to establish a strong market share in business environments.
But now, with reports out that Dell Inc. company president Michael Dell has begun discussions with some private-equity firms to follow through on his desire to take the company – with a current market cap of about $5 billion – private, key partner Microsoft Corporation is now apparently placing itself in the discussions to become a significant invest0r in the new venture.
There are reports that Microsoft Corporation may be willing to invest at least $1 billion in this opportunity. While Microsoft is more than flush with cash – so that paying $1 to $3 billion wouldn’t be such a big deal – there is this question that is being asked: Why would Microsoft, mainly a software company, be interested in investing in a hardware company like Dell Inc., and what might Dell gain from this. A blog post on the Wall Street Journal tries to delve into a plausible answer.
One of the benefits of this tighter relationship in the favor of Microsoft Corporation is that it could leverage its investment in Dell Inc. to further develop its ecosystem in terms of hardware – perhaps helping Microsoft develop a better Surface tablet or at least develop better synergy between the hardware and the Windows 8 operating system. The need for hardware is especially important for Microsoft’s quest for a siloed ecosystem similar to Apple Inc. (NASDAQ:AAPL), and the Surface tablet with Windows 8 has posted modest but underwhelming sales results so far. It’s possible that the hardware intelligence that Dell Inc has developed oer the years may help Microsoft re-tool its Surfact to be more intuitive with Windows 8 and all of the other software that comes out of Redmond.
What could be the corporate benefit for Dell Inc. in this relationship?
As Steve Rosenbush wrote in his post, “… (F)rom Dell’s point of view, Microsoft could help the company achieve what it needs more than anything: sharp business focus … an area of Microsoft strength. There is one additional potential benefit from Dell’s point of view. The presence of a powerful partner like Microsoft could help ramp up the pressure on its struggling rival Hewlett -Packard Company (NYSE:HPQ).”
Michael Dell is reportedly pushing to pay between $13 and $14 per share to take the company private, but it may take more than that. At the end of Tuesday’s trading, Dell Inc. stock was up more than 2 percent on the day to $13.13 a share. Meanwhile, Microsoft Corporation finished the day down slightly to $27.17 per share.
What do you think? Should Microsoft Corporation invest in Dell? How do you see this affecting both companies? We’d love to get your feedback in the comments below.
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