Microsoft In Talks To Invest In Dell Buyout

By Jordan Mammo email: , Jan 23, 2013 07:26 AM EST

Computer manufacturer Dell is looking to go private, and Microsoft is considering pitching in. The Redmond-based software developer is reportedly thinking about investing between $1 billion and $3 billion dollars in the company as talks continue between founder Michael Dell and the private equity firm Silver Lake.

Since Michael Dell began negotiating a deal to buy out public investors, Silver Lake has pegged the magic number to be around $14 billion.  

According to sources familiar with the talks cited by the Wall Street Journal as well as Reuters, Microsoft hasn't yet made a commitment to spend the money, and so far there has been no official confirmation that an offer was made or even floated as a possibility.

The Wall Street Journal also reported that exactly how Microsoft intends to invest in Dell is still hazy, but that it's likely to come in the form of preferred security.

The revelation that Microsoft is considering investing in the company came as a shock to many observers, but the move might actually make sense considering that Dell is one of the largest manufacturers of Windows PCs in the market.

Due to a recent string of poor financial reports, Dell became interested in going private last week. Some analysts think the company needs to expand its business beyond Windows-based computers, which many feel is to blame for the decline in business. In an attempt to do that, Dell has tried getting into non-consumer markets like security and storage, but analysts suggest it would be easier to do without having to report quarterly earnings on the publically-traded stock market.

For Microsoft, its incentive seems clear. If Dell could potentially consider moving beyond a computer line-up dominated by Windows software, it would be yet another blow to the software giant's portfolio. As an investor, Microsoft would have significant involvement in any course-correction that Dell undergoes.

Still, no one is quite sure if going private will ultimately stop Dell's downward spiral. According to the LA Times, going private "makes sense in taking the company out of the limelight and public scrutiny, we're not sure it improves the company's fundamental position," said Stern Agee analyst Shaw Wu.

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