A Digital Trinity

After weeks of rumors, it seems like a deal has been put together to buy back Dell from its current shareholders and return it to a private company – not a move that has been common in the tech industry, and not common for companies of this size.   And of interesting note to myself was the fact that Microsoft is one of the buy-out partners, along with CEO Michael Dell and the private equity firm Silver Lake Partners, by loaning $2 Billion dollars to help finance the deal.   This is not the first time Microsoft was invested in similar situations, back in 1997 they invested $150 Million in Apple as Apple struggled to find their footing.

However, more recently, I am more intrigued by the relationship between Microsoft and Nokia as they, together, attempt to gain some traction in the mobile space.  While the Windows Phone 8.x does not seem to be exclusive to Nokia, they do seem to be the premier brand for that platform.  While Windows 8 does not seem to be threatening the leaders in the market I do think together they can position themselves well against Blackberry (formally known as RIM).

This brings us to what was historically a strong point for both Microsoft and Deal, the traditional computer market.  Neither company has faired well as the world transitions to this “Post-PC” world.  Dell attempted and failed to gain any success with the Dell Streak – which you could best describe as an iPod competitor.  And MSFT has thus far failed to transition to the new computing environment, instead clinging to their successes of Office and Windows for the desktop.  However, you can see the market forces at work as the latest version of Windows features a far more touch oriented interface.  Though you can also see the struggle as not all the software has yet made the transition and their focus seems split between the traditional keyboard/mouse computers and the “new age” touch-based computers.  Add to that a lack of hardware manufacturers to build products that showcase the new Windows platform.  HP has essentially dropped out of the tablet market after failing in their bid with WebOS and after a promising CES 2012 many have stopped production due to low sales.  This resulted in Microsoft taking the lead in design and branding of their new Surface product – however, while they have designed and developed hardware before, this has not been an area of focus which is something I think Dell could fix.

Dell brings to the table a respected name in the industry, especially in the profitable server rooms.  But they also have been one of the leaders in digital consumer products and could provide Microsoft the hardware to showcase their new computing platform – just as Nokia has done for mobile.

In essence, this is a collaboration that makes sense; Microsoft = software, Dell = PC-type/Tablet hardware, Nokia = Mobile .  And it is a collaboration that I am not sure could happen with Dell remaining a public company.  Also keep in mind, the future is uncertain and Microsoft does not have the chops to just buy companies like they did in the past – they have to be more cautious.  If the relationships bears fruit, expect to see Dell or Nokia or both rolled up into Microsoft.  It remains to be seen if this trinity of past giants can, working together, take on the likes of Google and Apple.

Personally though, I think this is a good thing for Microsoft while I am not sure it is as positive for the likes of HP, Acer, Toshiba, or any of the other traditional PC manufacturers.  I do know that the days of the traditional PC are behind us as we steadily move toward more flexible and mobile devices for our computing needs and if OEM based companies are not moving with the times they will continue to fade into oblivion.  I actually expect that many will move towards “Chrome OS” or Android as consumer low-cost solutions as Google seems to be taking the angle that Microsoft did with Windows, with one modification – the open source nature allows each manufacturer to create their own brand of Android (ala Kindle).