Microsoft to pour up to $3B USD into Dell to help it go private, survive

Microsoft logoFollowing a rocky year on the markets and in sales, one of America's largest computer OEMs, Dell is reportedly considering going private and word is that Microsoft is willing to chip in an investment of $1-3B USD to help it with the plan.

The news was first broke by Bloomberg last Monday in a report 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 to CNBC and 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 Inc.'s Margaret Hefferan noted 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. ReadWrite Enterprise's Cormac Foster suggests 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 -- CNBC and The WSJ report that Microsoft is looking to chip in $1-3B USD loan to lighten the debt load Dell needs to privatize.

Microsoft's past investments have included Barnes & Noble, a 5 percent stake in Facebook, and Microsoft's 90s bailout of Apple 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 or Acer who have financial issues of their own. In that regard the move could suffer from scrutiny similar to Microsoft's relationship with phonemaker Nokia or Google 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)

Source: DailyTech

Tags: Dell, Microsoft

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