Microsoft in discussions to buy a 10% stake in Dell

Microsoft has emerged as the shock bidder in negotiations to buy a stake in Dell, according to reports.

Last week, SmartCompany reported that shares in the hardware maker surged after reports surfaced the company is in private equity buyout talks with private equity firms TPG and Silver Lake.

A private equity buyout would allow Dell to refocus its operations from traditional PCs towards tablets and other mobile devices without the pressures of being a publicly traded company.

However, there was a risk the deal could have fallen apart if the companies were not able to raise the required capital or agree on an exit strategy.

According to CNBC, Microsoft has since entered into negotiations to invest in the consortium, with the software giant in talks to join Silver Lake Capital’s bid by investing between $US1 billion and $US3 billion in its hardware partner, according to sources close to the talks.

Dell currently has a market capitalisation of around $US22.79 billion, meaning at current market prices an investment of between $US1 billion and $US3 billion would buy around 10% of the hardware company.

In recent years, Dell has failed to capitalise on the explosive growth of smartphones and tablets, with founder Michael Dell claiming a year ago that smartphones and tablets wouldn’t supersede desktop and laptop PCs.

“Let’s say you are going off to college… Would you take a smartphone instead of a tablet? Would you take a smartphone instead of a laptop? Will you write a paper or have your entire college experience on a smartphone?” Dell said.

Dell’s comments came a year after Dell’s global head of marketing for enterprise, Andy Lark, claimed that Apple’s iPad had limited appeal for enterprise customers.

“Apple is great if you’ve got a lot of money and live on an island. It’s not so great if you have to exist in a diverse, open, connected enterprise; simple things become quite complex,” Lark said.

“An iPad with a keyboard, a mouse and a case [means] you’ll be at $1,500 or $1,600; that’s double of what you’re paying. That’s not feasible.”

Meanwhile, the relationship between Microsoft and Dell has become strained in recent times, with former Dell chief executive Kevin Rollins hitting out against Microsoft in June last year, saying the company’s upcoming Surface tablet isn’t what consumers want.

“I don’t know that customers are begging for a Microsoft-based system. They are very happy with Apple and very happy with Android,” Rollins said.