Microsoft’s investment in Dell proves to be more than just a loan

By Quantum Capital Fund

One of the most talked about tech deals in 2012 was the possible buyout of Dell which saw the company begin the privatization process. And while it seemed as if Dell was the major benefactor of the deal, Microsoft also looks set to benefit significantly.

In addition to the loaning Dell $2-billion to help finance the deal, Microsoft can benefit beyond the loan as it penned a renegotiation deal for its software licenses.

"From and after the date hereof," the securities purchase agreement between Microsoft and Denali states, "each of the parties hereto agree to negotiate in good faith and enter into… one or more agreements between the parties and/or their Subsidiaries, in order to modify, alter or amend, effective as of the Closing, the standard terms for payment under the existing commercial agreements between (Microsoft) and/or its Subsidiaries, on the one hand, and Dell and/or its Subsidiaries, on the other hand, including the master OEM relationship agreements."

This can be seen in two ways. Microsoft has secured a guarantee that its relationship with Dell is not lost and that any future products that Dell produces will be run by Windows. However, it also means that Dell can’t completely discard its plans to find a workable solution for its ailing PC business. The company is now under even more pressure to manage the resources of its research and development department to spread the company’s focus between building a mobile device and improving sales of PC’s. This is far from a death sentence for the company, as Microsoft will be keen to protect its investment and will almost certainly be generous with its funding of Dells product improvement programme.