News Column

Microsoft Said to Be Entering Talks to Take PC Maker Dell Private

Jan 23, 2013

Ted Evanoff

Microsoft

-After pouring billions of dollars into the stock of Dell Corp., Memphis investor Southeastern Asset Management Inc. might finally see a payoff.

Microsoft Corp. is ready to join a group angling to buy Dell and take the Texas computer maker private, CNBC and The Wall Street Journal reported Tuesday.Southeastern Asset controls about 130 million shares of Dell stock, a volume second only to founder Michael Dell's stake of 243.3 million shares, according to SEC reports.

Analysts figure Southeastern has lost money on Dell since it made the investment in 2005. Since then, the No. 2 personal computer maker has lost ground to smartphones and tablets.

But the Memphis investor, which operates the Longleaf Partners mutual fund, could profit if a rejuvenated private Dell someday goes public again by issuing a new round of stock.

"They may feel they want to continue to hold the stock because of the opportunity to come back to the public markets at some point in the future," said Geoffrey Bobroff, a mutual fund consultant in East Greenwich, R.I.

Southeastern, founded in Memphis in 1975, manages about $30 billion in assets worldwide. For years it has been quietly in the background of the companies it holds shares in, although in recent years it has taken aggressive stances involving a pair of controversial companies, Oklahoma energy producer Chesapeake Energy Corp. and Japanese tech firm Olympus Corp.

It's not clear what role it has taken involving Dell. Southeastern officials did not return a call Tuesday seeking comment. Southeastern could sell its stake to Microsoft or remain in place as a major Dell stakeholder, analysts say.

Southeastern specializes in holding shares of stock in undervalued companies for years. It is run by a pair of well-known Memphians. Mason Hawkins serves as Southeastern chairman and chief executive officer; Staley Cates is president.

CNBC and The Wall Street Journal quoted unnamed sources saying Microsoft would contribute $1 billion to $3 billion and become a minority investor in a $23 billion to $27 billion transaction. Microsoft declined to comment on the reports which suggest it would partner with private equity investor Silver Lake Partners in a bid for the computer company.

Dell, which is based in Round Rock, Texas, hasn't said whether it's interested in selling. Dell, the largest U.S. computer maker after Hewlett-Packard Co., has long worked with Microsoft and used its Windows operating systems in Dell PCs.

Investing in Dell carries risks for Microsoft. No. 1 computer maker Hewlett-Packard Corp. could view Microsoft as a rival. Microsoft already has aunched a tablet computer, the Surface. It hasn't caught on with many consumers. But analysts say a Dell deal could help Microsoft advance tablet sales.

This article contains material from The Associated Press.



Source: (c)2013 The Commercial Appeal (Memphis, Tenn.). Distributed by MCT Information Services.