By now, you’re probably familiar with the reports that Michael Dell is looking to take his company off the public stock market and make it private again. The deal would be the largest leveraged buyout since the economy hit the skids in 2008, and one of the biggest ever. Because of this, the current problem won't be easy to solve.
As it looks now, Michael is basically going to have to empty his piggy bank, which means his 16% stake in the company, financing by private-equity firm Silver Lake Partners, and arrange another $15 billion in debt financing with banks.
Microsoft is also involved, reportedly ready to contribute $2 billion or more of equity in the form of a preferred security. Other reports put Microsoft's contribution at between $1 and $3 billion.
The Wall Street Journal reports that Microsoft's role is proving to be a sticking point, which should surprise no one. You don't hand over $2 billion and let a company go on its way. Word to the WSJ is the key players in the deal still need to work out the ways Microsoft would and would not be involved in Dell's business after a deal closes.
Looking things over, it would seem there is more downside for Microsoft and Dell than there is upside. The great upside potential for both companies, as I see it, is that they would be the closest thing to an Apple-like scenario of merging hardware and software under one roof. It won't be as tightly knit as Apple, but it will be closer than it is now.
That said, I'm not sure how much tighter they can get. Dell and Microsoft are already close and have great integration between hardware and software. There's not much more the two need.
At the same time, Microsoft risks alienating or damaging its relationships with other OEMs, especially HP and the surging Lenovo. We've been through this argument before when talking about Microsoft making prototype smartphones and tablets. It's risky business, but at the same time, where else would the OEMs go?
And, on that note, will a meddling Microsoft put an end to Dell's Linux efforts? Dell offers Red Hat and SuSe enterprise servers and is working with Canonical to certify Ubuntu on the PowerEdge servers. What will become of that?
Dell has sworn off smartphones for now, having gotten burned on some earlier models like the Streak a few years back. But Microsoft is anxious for OEM partners. Will it lean on Dell to offer Windows Phone 8 devices? If so, how will Nokia, Samsung, HTC and LG take it, if they aren't the supplier through Dell?
Taking all of these headaches into account, it's hard for me to see an upside. In this case, Microsoft might want to just wash its hands of the whole thing. Or give a loan with no expectations of influence, although I kind of doubt that would happen.