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Microsoft may be seeking protection from Linux with Dell loan

Agam Shah | Feb. 6, 2013
Microsoft's US$2 billion loan to Dell is a sign that the software maker wants to influence hardware designs in a post-PC world while protecting itself from the growing influence of Linux-based operating systems in mobile devices and servers, according to analysts.

Dell's PC offerings are mainly based on Windows, but the company has been adding Linux to its server offerings. The company has also been increasing its profile in the open-source community with contributions to the OpenStack cloud OS and efforts like Crowbar, which is a software framework for systems management on Linux servers.

With the loan, Microsoft and Dell can build an even tighter alliance around data-center transformation, said Matt Eastwood, group vice president and general manager of IDC's Enterprise Platform Group

"This includes converged infrastructures which power the virtual data center where systems management are critically important, but also integrated systems targeting specific workloads such as data warehousing, analytics and collaboration. These are systems which increasingly require deep joint engineering effort," Eastwood said.

The goal may be to jointly develop high-performing infrastructure that is easy to deploy and manage, but which also delivers faster time to revenue, Eastwood said. There is more focus on applications in such implementations, Eastwood said.

Analysts said privatization will provide Dell more time to build up a cohesive enterprise product stack while freeing the company from the pressure of delivering quarterly profits and answering investors. Dell for years has been trying to transition from a commodity PC supplier into an enterprise IT vendor, but has had its struggles. Analysts agreed that the company will continue to develop PCs as it may assist in selling more enterprise products.

While Microsoft's loan isn't a major part of the deal, it is large enough to ensure Dell's commitment to Microsoft's products and keep its struggling PC business alive, said Charles King, principal analyst at Pund-IT.

There could also be more touch-based laptops, tablets and even smartphones based on Microsoft's Windows operating systems in the future, King said.

However, a Microsoft-imposed limit on Linux-based product development would not necessarily be in Dell's best interests, King said. Despite Microsoft's loan, Dell will likely remain committed to Linux as it remains important to the company's enterprise offerings.

"I hope for both Dell's and Microsoft's case that the investment was made without strings attached," King said.

Microsoft has already upset some PC makers with its Surface device, which represents yet more competition in the tablet arena, and the investment to Dell could irritate other hardware makers, said Roger Kay, president of Endpoint Technologies Associates.

Looking forward, Dell has to balance the demands of Microsoft with other investors like Silver Lake, Kay said. But given the debt position, Microsoft will have a say in Dell's future.

"It's not going to thrill OEMs, but Microsoft has to look after its interests," Kay said. "There's a lot of motivation for Microsoft to be involved."

 

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