What Does Microsoft Stand To Gain From Dell Deal?
One of the biggest names confirmed to be taking part in the Dell buyout is Microsoft, lending $2 billion to the buyers.
It’s obvious that Microsoft wants to keep the Windows ecosystem healthy and continuously in a state of growth, but what else does Microsoft have to gain?
Aside from this brief statement the company hasn’t said much, “Microsoft has provided a $2 billion loan to the group that has proposed to take Dell private. Microsoft is committed to the long term success of the entire PC ecosystem and invests heavily in a variety of ways to build that ecosystem for the future… We’re in an industry that is constantly evolving. As always, we will continue to look for opportunities to support partners who are committed to innovating and driving business for their devices and services built on the Microsoft platform.“
Based on analysts’ speculation and Dell’s recent announcement that it’s “considering a transformation in to an enterprise software and services company“, it’s believed that Dell will likely drive cloud and corporation sales growth, with Microsoft products and services supporting them.
The combination of Dell server and storage hardware and Microsoft services like SQL server and Dynamics CRM could be a very lucrative result of Microsoft funding to Dell.
Dell has a huge customer base in the large business market and Microsoft realizes that selling to corporations has a much higher profit margin than PC Manufacturing alone.
An analyst with research firm Forrester recently said that the ability for each of those companies to continue to competitively sell their products depends on their ability to create tightly integrated hardware and software systems that are increasingly more efficient and easier to manage.
The New York Times recently reported that “the companies would tighten their relationship regarding use of Microsoft’s Windows software…” versus Microsoft obtaining seat shares on Dell’s board.
Microsoft has a huge vested interest in ensuring that PC manufacturers are healthy. Especially in a time when the PC market is experiencing such a dramatic shift.
Both companies have suffered from a slow market and they’ve both taken steps to mitigate risk. Dell is going private and probably moving in to enterprise software solutions and services, and Microsoft is lending $2 billion to Dell with the hopes that they’ll successfully make that shift and use Windows-based products when they do.
This move could give Microsoft more experience in supply chain management and the ability to integrate hardware and software optimally. This could also provide Microsoft with a new channel for sales within corporations that utilize hardware running Microsoft systems and services.
If Dell isn’t able to turn a corner faster and focus on where its value is and what it can do best, other manufacturing partners could react negatively. This is a risk for Microsoft. Analysts suspect that the reason Microsoft structured its contribution to Dell as a loan rather than an equity stake was because Microsoft did not want to send a signal of favoritism to other partners who manufacture PCs.
[Image via Flickr/Rory Finneren]
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