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ANALYSIS: Microsoft's nightmare is Dell and Apple's reversal

4:34 PM, Feb 8, 2013   |    comments
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By Scott Martin, @scottysmartin

SAN FRANCISCO - Microsoft CEO Steve Ballmer's worst nightmare might go something like this: PC juggernaut Dell would become so downtrodden it would become private equity bait and Apple so rich investors would be fighting for its cash.

But that's just what's happened. The technology landscape's transformation came into ultra high-definition this week with Dell going private in a leveraged buyout after years of PC struggles, and Apple under assault by an activist shareholder for its huge cash pile.

Dell on Tuesday agreed to be picked apart in the $24.4 billion buyout of his namesake PC brand, the largest concession to date of a battered industry stricken with Apple envy. Experts say Dell -- whose deal now faces opposition from its largest investor -- is in slow retreat from the low-margin PC business and needs to lever up to refocus on another try.

While Dell needs money, Apple's apparently got too much. On Thursday, billionaire hedge fund manager David Einhorn's Greenlight Capital sued Apple in a battle to unlock greater dividends from its whopping $137 billion cash war chest.

One can now hardly imagine an era 16 years ago, in which Microsoft's then-CEO Bill Gates offered Apple co-founder Steve Jobs a merciful helping hand with $150 million and promises to ship future Office software to Macs. No less, on the stage at MacWorld to His Steveness.

Nor that Michael Dell and current Ballmer would emerge as two of tech's laughingstocks for later missing tech's biggest turns and ridiculing Apple along the way. Yet there were signs along the way of runaway hubris.

Apple's meteoric rise on iPhones needs no introduction. But Ballmer certainly missed that call. Laughing, he said of the iPhone's debut: "$500, fully subsidized, with a plan, I said man, that is the most expensive phone in the world, and it doesn't appeal to business customers because it doesn't have a keyboard."

Founder Dell, whose company has suffered solid drubbings from iPads eating away PC market share, sounded off on Apple's reboot shorty after Jobs' company took the Microsoft investment. Here's what he said could be done to fix Jobs' Apple: "What would I do? I'd shut it down and give the money back to the shareholders."

Now Dell is the one getting a helping hand from Microsoft -- to the tune of $2 billion in its leveraged buyout -- and is giving the money back to shareholders at $13.65 a share.

Meanwhile, the clock is ticking on Hewlett-Packard's future in PCs. So stay tuned forNightmare on Ballmer Street, Part II.

And need one even say what Part III of this trilogy looks like?

USA Today

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