Microsoft to Pour up to $3B USD Into Dell to Help it go Private, Survive
January 22, 2013 2:07 PM
comment(s) - last by
Loan will help reduce the total amount of capital the troubled OEM would need to raise from banks
Following a rocky year on the markets and in sales, one of America's largest computer OEMs, Dell, Inc. (
) is reportedly considering going private and word is that Microsoft Corp. (
) is willing to chip in an investment of $1-3B USD to help it with the plan.
The news was first broke by
last Monday in
saying that Dell had approached private equity firms about participating in a privatization effort. Later in the week details on prospective share buyout pricing emerged; according
The Wall Street Journal
, the target buyout price for shares would be between $13 and $14 USD.
The move to go private was praised by some analysts. For example
's Margaret Hefferan
that Dell is following a broader trend of privatization, a trend that she says is driven by the typical impatience and distraction of shareholders, coupled with their tendency to push for hasty, ill-considered leadership changes.
's Cormac Foster
that the move will grant Dell greater privacy from negative reports regarding its financials, preserving its brand image in the enterprise sector.
The latest development in the Dell saga is a big one --
report that Microsoft is looking to chip in $1-3B USD loan to lighten the debt load Dell needs to privatize.
Microsoft CEO Steve Ballmer (right) may be putting up a loan to help his buddy, Dell CEO Michael Dell (center). [Image Source: CNN Money]
Microsoft's past investments have included Barnes & Noble Inc. (
5 percent stake in Facebook
, Inc. (
) (pre-IPO), and Microsoft's 90s bailout of Apple, Inc. (
) that saved the rival from almost certain bankruptcy.
Microsoft may be able to convert the loan to private shares at some point, which could pay handsome dividends if the privatization works and Dell recovers.
On the other hand, some analysts fear the move could alienate other PC OEMs like Hewlett-Packard Comp. (
) or Acer, Inc. (
) who have
of their own. In that regard the move could suffer from scrutiny similar to
Microsoft's relationship with phonemaker Nokia
) or Google Inc.'s (
direct ownership of Android phonemaker Motorola
, both of which have
troubled third party OEMs
The supposed loan from Microsoft is good news for Dell, should it pursue the privatization strategy. Dell will need to borrow remaining capital from various banks -- and has reportedly approached several. But it cuts the total pool of money Dell needs by as much as 10 percent given its current market cap ($22.88B USD @ $3.16 USD/share)
The Wall Street Journal
This article is over a month old, voting and posting comments is disabled
Who'da though Jason Mick would write an article attacking Dell's ability to survive...
1/22/2013 3:48:06 PM
Dell has tons of cash on hand, they really aren't struggling in terms of cash, they are looking to change their focus from just an OEM to a end to end technology provider, and they are hampered by stakeholders desires for profit and business as usual. They haven't declared a loss on any of their recent fiscal announcements.
The technology world is changing, as you can see by the announcement that general PC sales are were down last quarter for the 1st time ever.
Dell is looking to provide a more focused business and this requires a change in business model, which means risk in terms of changing the business. Risk scares shareholders and they get litigious when they're scared. It's too hard to change your business tied down by that sort of thing.
Please do some more research on Dell's cash on hand and business goals before claiming the sky is falling.
"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007
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