Microsoft Corporation (NASDAQ:MSFT) is reportedly considering joining a consortium of investors to offer Dell Inc. (NASDAQ:DELL) the financing to go private. It wouldn't be making a direct investment in the equity of Dell, according to reports, but it would give the company some sway among Dell's owners. This would be a big move for both companies and continue a string of somewhat desperate moves by Microsoft.
This isn't the first major investment Microsoft Corporation (NASDAQ:MSFT) has made in customers. In 2011, the company paid more than $1 billion to assure that Nokia Corporation (ADR) (NYSE:NOK) used Windows Phone on its next generation of smartphones. It was an effort to keep Google Inc (NASDAQ:GOOG) from gaining another major partner for the Android operating system.
So, is this a new trend for Microsoft Corporation (NASDAQ:MSFT) and what's the upside? The truth is that Microsoft is in need of partners to push Windows 8, which is really just a bet on the new OS itself.
The upside Microsoft Corporation (NASDAQ:MSFT) needs strong customers to keep using its operating systems for PCs, tablets, and smartphones. Even if Windows 8 and its mobile versions were superior to iOS or Android (debatable at best), the devices companies produce make all the difference when customers are making choices. Microsoft needs the best devices from HTC, Samsung, Dell and Nokia to come with Windows Phone 8, and if that means shelling some money over to keep Dell strong or make sure Nokia doesn't choose another partner, then that's what Microsoft needs to do.
On the PC front, Microsoft needs Dell to be financially strong so it can innovate and grow in the PC and tablet market. Dell is the third-largest PC maker behind Hewlett-Packard Company (NYSE:HPQ) and Lenovo, so the company is a huge customer for Windows operating system and the Office Suite.
Long term, both of these moves have more to do with new markets than the traditional PC or smartphone markets. We've seen a blurring of lines between everything from small smartphones to big-screen TVs in recent years, and Microsoft needs to maintain a central role in this shift. That's why it designed Windows 8 to be used on all kinds of different devices, opening up form factor options for manufacturers. Locking up Dell and Nokia as customers for the new OS means millions of customers will be exposed to it, growing the network.
The danger There are a few dangers if Microsoft puts money into a customer. As Microsoft invests in customers, the danger of alienating other customers grows, particularly in new markets. There aren't any solid operating system competitors for PC customers to turn to, but in smartphones and tablets there certainly are any it can't lose the likes of Samsung or HTC out of spite.
Google's Android operating system is already the No. 1 smartphone OS and is a close no. 2 behind Apple Inc. (NASDAQ:AAPL)'s iOS in tablets. These two established operating systems slowly leak into markets like corporate PCs, which Microsoft once dominated. The iPad, in particular, has become a common business tool, opening up new markets for Apple that Microsoft would like to continue to control.