Microsoft is reportedly “in talks” with Dell and a private equity firm to discuss investing $1 to $3 billion towards a leveraged buyout of the computer maker, rumored last week to be seriously considering going private.
The talks are being led by Silver Lake Partners and include Dell CEO Michael Dell and a special committee representing Dell shareholders, CNBC reported Tuesday, citing an unnamed source. The news site said “a deal is expected to be reached by the end of the week.”
Rumors that Dell, which has been publicly traded since 1988, was considering selling out to private investors cropped up last Monday, when Bloomberg reported the company was in “buyout talks” with at least two unnamed private equity firms.
The Bloomberg report, also citing unnamed sources, said Dell was in “preliminary” discussions with private investors to go forward with a move intended to “accelerate efforts to revive growth and cope with competition without quarter-by-quarter scrutiny from public shareholders.”
A separate Bloomberg report noted that Dell CEO Michael Dell told analysts and investors back in 2010 that he had considered taking the company private. Dell did not immediately respond to a request for comment.
The entry of Microsoft into the rumor mill surrounding Dell’s affairs makes a certain amount of sense, said Jack Gold, principal analyst for J.Gold Associates. A Microsoft investment in taking Dell private “wouldn’t be unprecedented” and could benefit both companies, the analyst said.
“Microsoft wants to keep a vibrant ecosystem alive and has worked with others, like Apple way back when and Nokia more recently, to keep companies in the market that benefit Microsoft. And keeping Dell a vibrant competitor, which would be more likely if Dell were not always in the public eye financially, would be in Microsoft’s interest, in my opinion,” Gold said.
Microsoft has the financial reserves to make such a play and investing in Dell “would probably be a better return than leaving those funds in the bank,” according to the analyst, who added that he had no specific knowledge as to whether the rumor was true or not.
“But I do think both Microsoft and Dell would benefit from such an investment. Dell gets to go private and re-focus. Microsoft gets to continue to work with Dell on innovative new productssomething Dell has done in the past but not so well more recently. This could be a fresh start with a high profile partner,” Gold said.
By Damon Poeter, PCMag