Posts tagged Dell

Microsoft has no reason to save Dell

If I kicked in a few billion dollars for anything, I’d want something in return. But does Dell have anything Microsoft would want?

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 MCTS Certification 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 MCITP Training 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.

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Windows 8 touchscreen devices to cost more, Dell says

Windows 8 PCs and laptops with touchscreens will cost a bit more to buy, Michael Dell says

IDG News Service – Touchscreen laptops and tablets with the upcoming Windows 8 OS will be priced higher than their non-touchscreen counterparts, Dell’s CEO said on Tuesday.

Dell will offer a full complement of Windows 8 products when Microsoft launches its new OS, CEO Michael Dell said during the company’s quarterly earnings call. The touchscreen Windows 8 products will occupy higher price bands, which could mean higher profit margins for Dell, he said.

“Unlike other Windows transitions, this is a transition where you are going to need a new PC,” Michael Dell said, adding that touch capabilities could drive more people to buy Windows 8 tablets and PCs.

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Microsoft hasn’t provided a release date for Windows 8 but analysts expect its release later this year. Lenovo has said it will sell a ThinkPad tablet with Windows 8 when the OS is launched.

Despite excitement around the touch interface, however, the upgrade cycle to Windows 8 won’t match that of Windows 7, especially in the enterprise, Dell said.

“Corporations are still adopting Windows 7, so we don’t think there will be a massive adoption of Windows 8 early on,” he said. It also remains to be seen if buyers will prefer tablets over PCs, he said.

The computer maker has been trying to reduce its dependence on sales of consumer PCs, where profit margins are lower, and is trying to sell more higher-priced systems, such as its XPS PCs. Dell’s mobility revenue in the quarter just ended declined by 10 percent, while desktop revenue declined by 1 percent.

Its PC business underperformed as demand slowed down and more consumers opted for tablets and smartphones, Brian Gladden, Dell’s chief financial officer, said during the call. Dell has shelved its consumer tablets and smartphones over the past few quarters, keeping only its enterprise tablets.

Dell’s PC revenue also dropped below expectations because it didn’t participate in the market for low-margin, entry-level PCs, which were a big chunk of PC sales for the industry overall, especially in emerging markets such as China.

Falling prices for memory and LCDs, and the normalization of hard drive supplies, favored companies selling those low-end systems, which in turn put pricing pressure on Dell’s business.

The hard drive issues caused by flooding in Thailand last year have been resolved and drive prices will fall as the year progresses, Gladden said.

“That’s behind us,” he said.

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