Microsoft's $2B loan to Dell comes with strings
Companies must negotiate changes to 'the standard terms for payment,' SEC filing states
Computerworld - As part of Microsoft's loan of $2 billion to a group trying to buy PC maker Dell, the two companies must modify the payment terms of Dell's current agreements with Microsoft, a document filed with U.S. regulators said.
CEO and founder Michael Dell and private-equity firm Silver Lake Partners have proposed to buy Dell for $24.4 billion, a move they said would allow the then-private firm to accelerate its transformation from PC seller to a vendor pushing higher-margin software and services to enterprises.
But the $2 billion from the Redmond, Wash., developer apparently comes with some strings.
Prior to the buyout's conclusion, Microsoft and Dell must "negotiate in good faith and enter into, as soon as reasonably practical" one or more agreements "to modify, alter or amend ... the standard terms for payment under the existing commercial agreements between [Microsoft and Dell]," the securities purchase agreement filed March 29 with the U.S. Securities and Exchange Commission (SEC) stated.
The changes will include ones to the master OEM relationship agreements between the two firms, the document added.
A master OEM agreement is an umbrella agreement that spells out the software licensing terms between a developer and an OEM, reseller or customer. Those agreements typically include payment rates -- which may vary depending on the number of licenses purchased -- and may include minimum quantities that the OEM, reseller or customer commits to buy.
Details were not included in the filing with the SEC, and the securities purchase agreement gave no hint which party the payment changes would benefit: Microsoft, which has leverage from the $2 billion loan, or Dell, which could threaten to de-emphasize PCs and Windows unless it was given a break.
"Payment terms" usually refers to the time a buyer has to pay the seller, but those terms often include discounts for early payment or to prod the buyer in directions the seller desires.
If Dell is able to win most-favored status through the changes, analysts have said other OEMs, such as the world's top two, HP and Lenovo, may fear they're getting shortchanged, and rethink their plans for Windows.
Or the modifications could be wider-sweeping -- the mention of the master OEM agreement hints at such -- to formalize what one analyst said was a likely "gentlemen's agreement" between the companies.
In early February, when Dell announced the buyout plan, Patrick Moorhead, principal analyst with Moor Insights & Strategy, speculated that Microsoft's $2 billion contribution was contingent on Dell stepping up its use of Microsoft's products, or promising not to dabble in alternative operating systems, such as Google's Chrome OS.
- CompTIA now offers its research without charge
- Microsoft's new CEO and his first-100-days plan
- Personal history may thrust new Microsoft CEO into visa debate
- As Dell cuts, Apple adds jobs in Austin
- Dell cuts 'small percentage' of workforce
- Lenovo's Motorola, IBM server buys will likely get strict U.S. security review
- Welcome to the era of radical innovation
- China passes Japan to become world's 2nd largest IT market
- BlackBerry sale might not include smartphones
- Tech hiring accounts for 10% of U.S. employment gains
- Aberdeen Group: Marketing Analytics for Manufacturing: Forging Customer Insights There are no recalls for poor marketing. Manufacturers need to get their customer intelligence and messaging right the first time. Learn how.
- The Brave New World of Customer-Centric Manufacturing The Unique Opportunity for Manufacturers to Better Understand their Consumers
- See the Possibilities Utilizing Data Visualization Do you simply want to collect data, or do you want to derive business insights from it? What if you could quickly and...
Changing the Way Government Works: Four Technology Trends that Drive Down Costs and Increase Productivity
This paper discusses four technology-based approaches to improving processes and increasing
productivity while driving down department and agency costs.
- LIVE EVENT: 5/7, The End of Data Protection As We Know It. Introducing a Next Generation Data Protection Architecture. Traditional backup is going away, but where does this leave end-users?
- On-demand webinar: "Mobility Mayhem: Balancing BYOD with Enterprise Security" Check out this on-demand webinar to hear Sophos senior security expert John Shier deep dive into how BYOD impacts your enterprise security strategy... All IT Industry White Papers | Webcasts