Leveraged Buyout of Dell Planned

Well, M$ is just going to be a creditor, not a shareholder in the new Dell. That’s good unless Dell dies under the burden of debt. If Michael Dell can revitalize the company with enough growth to pay back the debts, Dell can finally be free of “conventional wisdom” that locks Dell into Wintel.

“The transaction will be financed through a combination of cash and equity from Michael Dell, cash from investment funds affiliated with Silver Lake, cash invested by Michael Dell’s investment firm, MSD Capital, and a $2 billion loan from Microsoft (MSFT_). The deal will also be financed by a rollover of existing debt, and debt financing from Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.”

see Dell to Go Private in $24.4 Billion Deal (Update1) – TheStreet.

This is another form of diversification for M$ and it should not interfere with M$’s relationships with other OEMs. If I were Dell, I would pay back M$ ASAP before M$ sets the hook.

See also The Register’s Take and an astute comment there …

About Robert Pogson

I am a retired teacher in Canada. I taught in the subject areas where I have worked for almost forty years: maths, physics, chemistry and computers. I love hunting, fishing, picking berries and mushrooms, too.
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7 Responses to Leveraged Buyout of Dell Planned

  1. I think it is more likely that M$ sees GNU/Linux as inevitable and it is more palatable for M$ to profit from GNU/Linux through a surrogate than directly. Dell sees Asia and other emerging markets as important and that’s where the big GNU/Linux growth lies. Emerging markets are not locked in to Wintel and M$ should not expect monopoly there.

  2. I don’t think M$ can control Dell for $2billion. I think it’s an investment by M$ to maintain its revenues. M$ has done all it can with desktop/notebook/tablet and profits still declined. M$ needs to open other segments if it is to grow and not stagnate.

  3. oiaohm says:

    lpbbear dell is weak in the upcoming battle.

    Battling against Samsung is going to be a very had time. Reason Samsung has the means to make every part they need directly for ARM. Almost every part for a x86 machine. This avoids hardware maker mark ups.

  4. lpbbear says:

    “One theory about why Microsoft lent $2 billion as part of a deal to take Dell private is that Microsoft plans to use its newfound influence with the company to stop Dell from further building Linux hardware.”

    That would be a small part of their goals. I believe Microsoft will try to take the PC architecture proprietary ala Apple. Dell would be part of that. UEFI is another facet of that.

    By buying into Dell Microsoft also hopes to force other PC manufacturers to toe the party line by using Microsoft’s influence with Dell to threaten those other manufacturers when they stray from using Windows based products.

    Same old crap Microsoft has pulled for decades but this time it threatens the goose that laid their golden egg.

    As I said earlier I don’t think the other manufacturers are going to roll over and play dead this time.

  5. eug says:

    One theory about why Microsoft lent $2 billion as part of a deal to take Dell private is that Microsoft plans to use its newfound influence with the company to stop Dell from further building Linux hardware. Is that really the case, or just a conspiracy theory?


  6. ram says:

    lpbbear is right. Microsoft continues to try to control the hardware space (mostly at someone else’s expense!). UEFI is just the latest. It is, of course, killing the motherboard makers that went along with it (to the benefit of Intel and their barebones NUC boxes – which are powerful, cheap, and designed for Linux).

    Previously, Microsoft disrupted device drivers. Remember, even IBM had trouble getting manufacturers to supply OS/2 device drivers and had to write most of them themselves. Linux audio and video drivers were a nightmare in the early days – but now the audio and video device business has shrunk to just a few big players, such as Intel, who can stand up to Microsoft.

  7. lpbbear says:

    I have long expected that Microsoft would try to “slither” its way into the PC hardware business. They got their feet wet with the “XBox” but did not come blatantly out and release an actual PC. Instead they disguised it as a “game console”. Underneath it was nothing more than a MS PC. UEFI is a part of this move. By buying into Dell Microsoft is in my opinion trying to gain complete control of the PC hardware business and it is most definitely an attempt to eliminate competition from Linux based hardware with the ultimate goal of blocking Linux based products from gaining more of a foothold in the PC market.

    Dell joins the long list of fools who have “partnered” with Microsoft. Long term this will backfire on Microsoft. I don’t expect the other OEM’s will roll over and play dead as Microsoft tries to gain control of the PC hardware market. There will be a backlash by other OEM’s against this move and I think it will actually result in a faster move away from Microsoft by Dell’s competitors with Microsoft becoming more and more compressed into a singular company much like Apple with its totally locked down proprietary products. (not to mention the incredible loss of Microsoft’s money on this move)

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