The role Microsoft Corp. (MSFT) would play in a privately owned
Dell Inc. (DELL) is one of several issues being hashed out ahead of
a final buyout agreement for the computer maker, people familiar
with the negotiations said Tuesday.
The issues aren't new, the people said, and have been under
discussion since Microsoft proposed earlier this month to
contribute $2 billion or more of equity in the form of a preferred
security as part of a deal to take Round Rock, Texas-based Dell
private. The people say a deal remains on track and could be
announced in the coming days.
The deal, which would value Dell at $22 billion or more and, if
completed, would be the largest leveraged buyout since the
beginning of the financial crisis, is a complicated one. As
currently envisioned, it would include the nearly 16% Dell stake of
founder and Chief Executive Michael Dell, contributions from
private-equity firm Silver Lake Partners and Microsoft and about
$15 billion in debt financing arranged by banks.
Microsoft's role in the new company is proving a sticking point,
the people familiar with the matter said. Microsoft is expected to
have a say in Dell's operations rather than being just a source of
funding for the Dell buyout, they said. Representatives from both
companies are busy hashing out the ways Microsoft would and would
not be involved in the running of Dell after a deal closes, some of
the people familiar said.
Partly at issue is their commercial relationship. Dell, the
world's third-largest maker of personal computers, is one of the
biggest channels for Microsoft's Windows operating software. The
sides are discussing how Microsoft's investment in Dell would alter
that commercial arrangement. Under one scenario being discussed,
Dell would agree to use Microsoft's Windows software to power the
vast majority of its devices, one of the people has said.
Microsoft CEO Steve Ballmer in an interview Tuesday declined to
comment on the Dell situation.
But he said the computing industry is rapidly changing and that
Microsoft has an interest in the health of computer makers, known
in the industry as original-equipment manufacturers. "We want all
of our OEM customers to be as strong as they can possibly be," Mr.
Ballmer said.
Dell was once the world's largest PC maker, but has struggled
lately as rival devices such as tablets and smartphones have
increased in popularity. Its own attempts in those areas have
largely fallen flat.
Over the past several years Dell has shifted its focus away from
PCs to products and services for businesses. But the new revenue
from these efforts hasn't offset the declines from the PC business,
which still accounts for half of Dell's revenue. The company's
share price has declined more than 20% over the last year and was
at $12.93 in recent trading, giving Dell a market capitalization of
around $22.5 billion.
-- Shira Ovide and Vipal Monga contributed to this article.
Write to Ben Worthen at Ben.Worthen@wsj.com and Anupreeta Das at
Anupreeta.Das@wsj.com
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