January 23, 2013

When Microsoft Buys Dell

When Microsoft buys Dell.

A Microsoft buys Dell scenario -

Dell is preparing to go private. Silverlake is raising financing for the leveraged buyout and Microsoft is said to provide $2 Billion of this financing.

Per Bloomberg 
Dell Inc. (DELL) is getting closer to clinching a leveraged buyout with Silver Lake Management LLC, and Microsoft Corp. (MSFT) is planning to provide part of the funding, people with knowledge of the matter said.
This is the same Silverlake that bought Skype from eBay in Nov-2009, cleaned it up and then flipped Skype to Microsoft in May-2011 (Andreesen Horowitz also enjoyed making money in this transaction).

Silverlake seems to be using the same strategy with Dell. First take Dell private, clean it up (as Microsoft wants) then sell it to Microsoft. The timeframe 1 to 2 years.

So, in 2014, Microsoft Buys Dell, is likely to be the big news.

Why will Microsoft Buy Dell?
The PC business is stagnant. Microsoft needs to grow.

Microsoft may consider two paths for growth –
1)       Oracle-way of providing complete software-hardware solutions and services to enterprise customers. IBM, HP, EMC are all going down this path.
2)       Apple-way of providing complete hardware-software solutions to consumers.
Google, Amazon etc are going down this path.

Microsoft will try to do both. It thinks it can do both.

For either path, Microsoft needs strong hardware skills – more than its current Xbox, Surface skills.

Dell will bring these hardware skills to Microsoft. Dell’s consulting arm will be an added plus.

Microsoft and Dell grew up as siblings in the golden years of PC growth – Bill Gates, Michael Dell, Steve Ballmer. They will find it comfortable to work with each other.

And, when Steve Ballmer does resign, it could be Michael Dell who becomes the CEO of a combined Microsoft-Dell.

Where Does This Leave Cisco and Intel?
In a much longer term, an Intel-Cisco merger will start making sense. Cisco and Intel are also suffering from a lack of growth.

All speculations.

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