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Summary:

If Microsoft takes a big stake in Dell it could sway operating system and software loaded on Dell PCs, servers and potentially other devices.

Michael Dell
photo: Dell

If Microsoft takes a $1 billion to $3 billion stake in Dell, a possibility under discussion according to CNBC, the deal would mean more of a captive audience for Microsoft’s bread-and-butter Windows desktop and server operating systems.

dell+xps+10+dockCNBC reporter David Faber characterized Microsoft’s prospective investment as part of mezzanine funding — a mix of debt and equity that typically goes to finance the expansion of an existing company — for the stressed hardware maker. Talk of Dell going private has circulated for a week or so with Silver Lake Partners reportedly driving that deal. The rumored price is $13 to $14 per share.

Dell, based in Round Rock, Texas, used to dominate the tech industry with PC sales and server sales, but missed the boat in the massive shift to mobile and smart phone computing. Dell and rival HP have both suffered from their miscues in trying to catch Apple in that booming market.

Microsoft is likewise under pressure by the mobile/phone shift. By investing in Dell — which now also offers Linux on its boxes — it could push a Windows-focused agenda. For its part, Dell has tried to lessen its dependence on commodity hardware and move more into cloud computing, storage and related services with acquisitions of EqualLogic, Compellent, Quest Software, Wyse Technology and other companies.

Some on Wall Street are not sold on a proposed buyout. Despite all those acquisitions — totaling $13 billion over 5 years,  70 percent of Dell’s business remains tied to PCs, according to Sterne Agee analyst Shaw Wu. Improvement compared to nearly 90 percent in the early 2000s, but not good enough, Wu wrote in a research note.

Redmond, Wash.-based Microsoft has invested in companies including Barnes & Noble, Facebook and others companies. Its decision to manufacture its own Surface tablets last year alienated many of its long-time hardware partners.

Microsoft CEO Steve Ballmer has taken the brunt of the blame for the company’s seeming inability to parlay its desktop operating system and applications dominance into this new era. The latest blast came from former Microsoft exec Joachim Kempin who’s inked a new book about his 20 years at Microsoft.

This story was updated at 9:50 a.m. PT with analyst comment background on Microsoft CEO Steve Ballmer.

  1. This sounds like yet another dumb move by Microsoft, and one that’s rooted in their 1990s thinking. They don’t need to “push a Windows-focused agenda” on someone else, they need to make products that are in line with today’s market.

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  2. dell is already a ms lackey- why buy them ?

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  3. Sell them both and give the money back to the shareholders.

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  4. Here’s a thought to ponder on this ‘eMerger’. How are the consumers consuming the repackaged
    kMart-sEars brand to Mego-beHeman-olithic WALMART/CHINAMART brand?? I’ll ponder for you
    …if you don’t mind. Has anyone been in a Kmart or Sears these days to get their low -cost NEEDS met …minus their latest SALES? Well, this IS thee analogy.
    MicroDell – MicroDell – HI-HO the merry-O the Micro’s in the Dell? These two have a history –
    In their beginnings, as expensive props to the consumer – Expensive software – on Expensive
    OEM hardware. Then came the Great Divider …Walmart, er, I mean Apple. Apple chugged along
    looking for The Pearl … Which HP declined, By the way, by the inventor that Apple’s Steve Jobs
    saw – as the Holiest of Grails – we all, now know, what a 595B Market Cap that turned out to be!
    (As a side note here, I would bet if Exxon knew what Steve knew at that time – we would have eXPads or maybe eXCapes?) To finish – What might keep these two afloat in the future would be
    a strategy similar to Internet Explorer 7 – when they gave it away – FOR FREE Market share was established, and Marc Andreessen’s and Eric Bina’s Dream – Mosaic/NetScape was promptly quashed. Now Micro/Dell are in this position facing Google and Apple/Samsung technocrats.
    BUT – This IS what will happen! Microsoft is BureauCratically HEAVY – still Dominant …
    yet…ask IBM and Haloid, er, Xerox corps what THAT felt like – THEN.

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