Microsoft is in talks to participate in the deal to take Dell private, CNBC’s David Faber reports.According to his sources, Microsoft might invest $1-$3 billion with the group looking to take Dell private.
Microsoft is talking to Silver Lake and Michael Dell, who are working on the deal. The Microsoft investment would be “mezzanine,” or some sort of preferred shares, says Faber.
Mezzanine is typically debt that converts to equity if the debt isn’t paid back in certain period of time. Faber wasn’t entirely clear on what he meant when he said it was in the form of “preferred” shares. Our guess is that the Microsoft loan could convert to preferred shares at a certain point.
This makes sense since getting the money in place to take Dell private is probably one of the hardest parts of this deal. Microsoft, which is loaded with cash, could help out.
Microsoft has been a very aggressive investor. It invested in Facebook. It invested in Barnes & Noble. It invested in Comcast. It invested in Apple, when it was at death’s door. Like any investor, Microsoft has a mixed track record.
Investing in Dell would be very interesting for both companies. Part of Dell’s downfall can be attributed to its reliance on the Windows-based PCs, which is a shrinking industry. As a private company, Faber notes that Dell wants to reinvent itself. If Microsoft is an investor, it’s going to have influence over Dell’s business. This could limit Dell’s ability to seek out a new model.
From Microsoft’s perspective, it’s another tangled conflict. It’s investing in one of its PC partners. How will Acer, HP, Asus, et al feel about Microsoft picking a PC company to invest in?
Here’s the video of Faber: