Microsoft Corporation (MSFT): Why Get Into Dell Inc. (DELL)?

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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.

Michael Dell

But now, with reports out that Dell Inc. (NASDAQ:DELL) 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 (NASDAQ:MSFT) is now apparently placing itself in the discussions to become a significant invest0r in the new venture.

There are reports that Microsoft Corporation (NASDAQ:MSFT)  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. (NASDAQ:DELL), 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 (NASDAQ:MSFT) is that it could leverage its investment in Dell Inc. (NASDAQ:DELL) 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 (NASDAQ:DELL) 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. (NASDAQ:DELL) in this relationship?

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