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Microsoft's loan to Dell certain to trigger more OEM angst, say analysts

Gregg Keizer | Feb. 6, 2013
Microsoft's $2 billion loan to Dell, one of its largest computer-making partners, will have an impact on how other OEMs view their Windows ecosystem collaborator, analysts said today.

"It's not necessarily a bad thing [for HP and Lenovo]," said Krans of the loan, referring to last quarter's No. 1 and No. 2 OEMs. "If [Microsoft's loan and Dell's privatization] can be successful, HP and Lenovo benefit indirectly because it makes the overall Windows ecosystem stronger. That's the unifying piece across all this."

Krans believed Microsoft would be very cautious in its future relationship with Dell. Any move that might have an impact on the relationships with other OEMs, said Krans, would be "closely managed" to make sure it wasn't seen as playing favorites.

But others questioned whether Microsoft's OEM partners would trust the Redmond, Wash. developer to not leverage its $2 billion loan in ways that would hurt their business.

"There were already strained relationships with the OEMs," Krans acknowledged. "There's been uncertainty about manufacturers' evolving relationships for quite some time."

That there has.

Executives at both Hewlett-Packard (HP) and Acer, for instance, have knocked Microsoft's Surface hardware, and Redmond's decision to become an OEM. Analysts have generally downplayed the tension, noting that computer makers have few -- if any -- choices for their PCs besides Microsoft's Windows.

But those relationships could be even more tense if Microsoft leans on Dell in ways conceived by Cherry, who pointed out areas where Dell has more expertise than Microsoft.

"Dell has a lot of experience in operating a manufacturing business, knowing how to do it efficiently and effectively, how to keep the lines running," said Cherry. Microsoft, comparatively speaking, does not, and may look to Dell for insights on how to more efficiently build hardware like the Surface tablets.

Likewise, Cherry added, Dell has far more experience handling consumer support, another area that Microsoft, for all its prowess in dealing with enterprises, lacks. Saying that his calls to Microsoft's support for help with both Windows and the Surface RT was a "nightmare," Cherry, who acknowledged he was a long-time buyer of Dell PCs, applauded its support. "I'd much rather call Dell than Microsoft."

Microsoft's loan wasn't the first time the company gave a helping hand to an OEM. In 1997, Microsoft and Apple negotiated a deal under which Microsoft purchased $150 million in Apple stock, signed a five-year patent cross-licensing agreement, and settled lingering issues from 1988 litigation where Apple accused Microsoft of stealing its graphical user interface (GUI) to create Windows. Another part of the package committed Microsoft to ship a Mac version of its Office suite, which it continues to sell.

That deal was credited with saving Apple from going under; today's loan, though, is in the context of a completely different technology environment.

"This speaks to how much the OEMs' relationship with Microsoft has changed," said Krans. "You can't operate a stand-alone PC business anymore because computing is changing. It's not just the PC today."


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