US$24 billion is a hell lot of money. However, the amount is understandable to take a company such as Dell off the publicly-traded stock market into private hands.
In the most recent Wall Street rumours that have escalated the week before the Chinese New Year 2013, there were reports of a Dell deal – which is being financed by a combination of cash and equity from Michael Dell himself, together with private investment funds.
Nonetheless, the most interesting bit to the hawk-eye IT industry is the US$2 billion loan from Microsoft to facilitate the sale, which has sparked a whole series of speculation of Why would Microsoft want part ownership of Dell?
Among the most popular reason is that this is part of Microsoft’s strategy to ensure a fighting chance for Windows – by securing a reasonably strong hardware partner committed to build on the Windows OS, instead of Google’s mobile OS or even the various Linux distros.
While another reason is that Microsoft eyes the over 2,400 IP patents that Dell has to its name; another speculation is that Microsoft got involved in the deal to learn more from Dell about consumer-selling.
But this here another worthwhile theory too: That Dell and Microsoft are planning a longer-term play into the ‘Engineered Systems’ world of the Oracles and IBMs.
Coined by Oracle’s Larry Ellison in recent years, ‘Engineered Systems’ or ES is defined by hardware and software that is designed and built; right from the inception stage; as a single product. This way, both hardware and software is configured, modified and tweaked to provide the very best compatibility for the highest possible performance, reliability, availability and security.
Only IT giants which own both hardware and software are able to experiment and gain from Engineered Systems.
ES is Oracle’s strongest competitive edge ever for delivering high-performance enterprise systems, and is expected to continue so by virtue of the high-barrier-of-entry criteria required to play in this space.
IBM is the other, by having strong components of hardware (database and storage) as well as software (enterprise applications and middleware).
Most of the other IT giants are still wannabes in this aspect, such as SAP – which has Sybase (not quite best-in-class database) and thus still has to grudgingly rely on IBM hardware; HP – which is a strong hardware player but only owns patches of the software business. Let’s not even talk about brands like EMC and Cisco who are firmly hardware players.
With a Dell-Microsoft partnership, ES becomes a realistic idea as Microsoft has formidable (database) hardware in its SQL servers for mid-range businesses together with world-class enterprise applications. Dell, on the other hand, purports eons of leadership at building hardware that allows OSes and applications to work beautifully on.
Dell may slip further from its current World No.3 spot as a PC maker, but it has much to gain in the longer run with Michael Dell playing his cards right for a chance to rock in the ES world with Microsoft’s software expertise.
The forerunners of the IT world will be those who can master the development of ES and sell them well with the promise of superior computing performance.
Meanwhile, Michael can take comfort in leaving the commodity world of PC makers where players take easy jabs at each other such as in the two following examples:
HP issued backstabbing statements saying that “Dell faces an extended period of uncertainty and transition that will not be good for its customers,” and that “Dell’s ability to invest in products and services will be extremely limited with its debt load.”
Lenovo didn’t letting the opportunity to criticise slip by, saying that the Group remains focused on products and customers rather than “…distracting financial maneuvers and major strategic shifts.”
I’d say it’s better to let sleeping dogs lie and strain your ears instead for developments of those in the ES league.
IT BYTES BACK! says: Michael Dell could finally be learning how to Rock with Microsoft as the best bet for him to do this wel
