Updated 2/5: A couple weeks ago, rumors began circulating that Microsoft would put up some funds -- perhaps as much as $3 billion -- for a private equity takeover of Dell. The reports surfaced in The Wall Street Journal and on CNBC around the same time.
The rumors were true, and the deal was announced this morning. Microsoft in fact loaned $2 billion to Dell to close the deal.
The template sounds familiar. A big software company is falling behind as the world goes mobile, so it spends some of its warchest on one of its struggling hardware partners to help it out -- at the risk of alienating its other partners.
In 2011, the companies were Google and Motorola. Google's Android platform was doing fine in terms of market share, but Android was facing a flurry of patent lawsuits from mobile incumbents like Apple and Microsoft, and the Android ecosystem was not reliably supporting Google initiatives -- Verizon made Microsoft's Bing search the default on some phones, U.S. carriers did not line up behind Google Wallet, handset makers were not getting Android updates out on a reliable schedule, and so forth. Meanwhile, Apple's command-and-control approach with the iPhone and iPad was creating happy customers and record profits.
By buying Motorola, Google put an end to its patent problems -- which was the stated reason for the acquisition -- and gained a direct distribution channel for any mobile-related products or services that Google wants to push. Larry Page hinted at this role for Motorola yesterday on the company's earnings call, although he focused on hardware innovations like better battery life.
Flash forward a couple years. Microsoft is facing huge challenges adjusting to the mobile-first world. The iPad and other tablets are eating into traditional desktop and laptop PC sales, and so far Windows 8 and the Surface have not stopped that trend. Three years of Windows Phone's efforts to take on the iPhone have made little dent.
By investing in Dell, Microsoft has influence over the number-three PC maker and access to all its supply chain expertise. Who better to help Microsoft turn out a series of great Windows 8 tablets or convertibles or whatever other hardware Microsoft believes will help it sell more software? Plus, didn't Dell make phones at one point?
But there's more to Dell than hardware, and it may be these pieces that most interest Microsoft.
While Dell is best known as a PC builder, Michael Dell has been pretty clear that he sees services as the company's future. The company's biggest-ever acquisition was systems integrator Perot Services ($3.9 billion in 2009), and it's also snapped up software providers like Quest (software management) and Wyse (virtualization). In this vision of the future, Dell looks a lot more like IBM, helping companies set up and run datacenters and do complicated software integrations.
In fact, this services business has been the brightest spot in Dell's recent earnings reports -- while it only makes up about one-fifth of Dell's overall business, services revenues are holding steady rather than shrinking.
Remember: as much as Microsoft portrays itself as a consumer company, most of its revenues comes from enterprises. A deeper financial relationship could help Microsoft push infrastructure software and cloud services like Azure and Office 365, as Ted Samson at Infoworld pointed out.
Windows 8 tablets are only a part of the equation here.