You might have heard that Michael Dell was taking his company private. How? He partnered with Silver Lake who is putting several billion dollars, both borrowed a ton of money, mostly at high interest rates but also $2B from Microsoft (NASDAQ:MSFT). I have several thoughts on this deal and would love t hear yours. -Why go private? I’m certainly in favor of private equity (even considered working in it for a while) but this one intrigues me. Michael Dell seemed like he was in charge so what more can he do now that wasn’t possible when the company was public? If he had some brilliant ideas, was he waiting to take the company private (at a lower value) to start implementing them?
What is Microsoft’s play here?Clearly, Microsoft is going through a lot of transformations these days. It is moving from its traditional software company to cloud based software, gaming and even building its first hardware device, the Surface. Is it based off of the Apple strategy? The fact that its recent tv ads are so similar to what Apple has produced certainly makes me wonder about it. One major hurdle that Microsoft faces about building hardware is that it has no experience/infrastructure. But Dell (DELL) does? Could this be the start of an alliance between the two?
Sure, it could simply be Microsoft putting some of its cash reserves to use but that seems unlikely doesn’t it? Microsoft, Apple and other companies with huge cash reserves rarely start behaving as hedge funds, trying to rack up big returns, etc.
Disclaimer: No position on Microsoft (NASDAQ:MSFT)