Microsoft is potentially a partner in Dell buyout rumor
A couple of days ago we got the news that Michael Dell, founder and CEO of Dell Computers, was in talks with private equity companies to take the company private. The rumored cost of such a move is $22bn which is a lot of money, but if the news we are hearing today is true Dell could be getting some serious help from Microsoft.
A couple of days ago, we reported about the rumor floating around the web that Michael Dell was looking to take the company private, and that the reported price of the move was going to be around $22 billion. Needless to say, such a move would require some help from private equity companies, and the rumor included Silver Lakes Management as one of the major partners that was going to be the lead in the buyout.
Today, we find out that another company that Silver Lakes has dealt with in the past is possibly going to join the party. If anyone remembers the big Skype purchase of a few years ago that saw Microsoft buy Skype for an insane amount, you will know that Silver Lakes was also a major player in the deal between Skype and Microsoft. In a deal that saw Microsoft buy Skype for $8.5 billion, Silver Lakes, which had invested $1 billion in Skype, pocketed three times their initial investment.
This makes this news that Microsoft is seriously considering giving Michael Dell a helping hand a lot more reasonable. The news originated with a CNBC report that suggests Microsoft's involvement could range between $1 billion to $3 billion, and that their investment would be of the "mezzanine" type. This means that the debt converts into equity if the amount invested isn't paid back within a certain period of time; or possibly into preferred shares.
As big as that investment figure is, you need to remember that Microsoft is still flush with lots of cash and has shown it isn't reluctant to spend the money if they think it will benefit, even if it a future benefit. We have seen this with Microsoft's huge investment in Nokia with the eye of making Windows Phone a success, or even the small change investment of a couple million dollars in Facebook. So the idea of have a "closer" relationship with a hardware maker like Dell shouldn't come as a surprise, especially since Microsoft has been getting into the hardware end of the business as well.