The effort to take Dell private has gained a prominent, if
unusual, backer: Microsoft.
The software giant is in talks to help finance a takeover
bid for Dell that would exceed $20 billion, a person briefed on the matter said
on Tuesday. Microsoft is expected to contribute up to several billion dollars.
An investment by Microsoft — if it comes to pass — could be
enough to push a leveraged buyout of the struggling computer maker over the
goal line. Silver Lake, the private equity firm spearheading the takeover
talks, has been seeking a deep-pocketed investor to join the effort. And
Microsoft, which has not yet made a commitment, has more than $66 billion in
cash on hand.
Microsoft and Silver Lake, a prominent investor in
technology companies, are no strangers. The private equity firm was part of a
consortium that sold Skype, the online video-chatting pioneer, to Microsoft for
$8.5 billion nearly two years ago. And the two companies had discussed teaming
up to make an investment in Yahoo in late 2011, before Yahoo decided against
selling a minority stake in itself.
A vibrant Dell is an important part of Microsoft’s plans to
make Windows more relevant for the tablet era, when more and more devices come
with touch screens. Dell has been one of the most visible supporters of Windows
8 in its products.
That has been crucial at a time when Microsoft’s
relationships with many PC makers have grown strained because of the company’s
move into making computer hardware with its Surface family of tablets.
Frank Shaw, a spokesman for Microsoft, declined to comment.
If completed, a buyout of Dell would be the largest
leveraged buyout since the financial crisis, reaching levels unseen since the
takeovers of Hilton Hotels and the Texas energy giant TXU. Such a deal is
taking advantage of Dell’s still-low stock price and the abundance of investors
willing to buy up the debt issued as part of a transaction to take the company
private. And Silver Lake has been working with Dell’s founder, Michael S. Dell,
who is expected to contribute his nearly 16 percent stake in the company to a
takeover bid.
Yet while many aspects of the potential deal have fallen
into place, including a potential price of up to around $14 a share, talks
between Dell and its potential buyers may still fall apart.
Shares of Dell closed up 2.2 percent on Tuesday, at $13.12.
They began rising after CNBC reported Microsoft’s potential involvement in a
leveraged buyout. Microsoft shares slipped 0.4 percent, to $27.15.
Lucas Jackson/Reuters
Dell’s founder, Michael S. Dell, attended the unveiling of
Microsoft’s Windows 8 operating system last year in New York.
Microsoft’s lending a hand to Dell could make sense at a
time when the PC industry is facing some of the biggest challenges in its
history. Dell is one of Microsoft’s most significant, longest-lasting partners
in the PC business and among the most committed to creating machines that run
Windows, the operating system that is the foundation of much of Microsoft’s
profits.
But PC sales were in a slump for most of last year, as
consumers diverted their spending to other types of devices like tablets and
smartphones. Dell, the third-biggest maker of PCs in the world, recorded a 21
percent decline in shipments of PCs during the fourth quarter of last year from
the same period in 2011, according to IDC.
In a joint interview in November, Mr. Dell and Steven A.
Ballmer, Microsoft’s chief executive, exchanged friendly banter, as one would
expect of two men who have been in business together for decades.
Mr. Dell said Mr. Ballmer had gone out of his way to
reassure him that Microsoft’s Surface computers would not hurt Dell sales.
“We’ve never sold all the PCs in the world,” said Mr. Dell,
sitting in a New York hotel room brimming with new Windows 8 computers made by
his company. “As I’ve understood Steve’s plans here, if Surface helps Windows 8
succeed, that’s going to be good for Windows, good for Dell and good for our
customers. We’re just fine with all that.”
Microsoft has been willing to open its purse strings in the
past to help close partners. Last April, Microsoft committed to invest more
than $600 million in Barnes & Noble’s electronic books subsidiary, in a
deal that ensures a source of electronic books for Windows devices. Microsoft
also agreed in 2011 to provide the Finnish cellphone maker Nokia billions of
dollars’ worth of various forms of support, including marketing and research
and development assistance, in exchange for Nokia’s adopting Microsoft’s
Windows Phone operating system.
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