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Why Microsoft 'loaned' Dell $2 billion

February 5, 2013: 10:42 AM ET

microsoft_dellMicrosoft worried that equity stake would have upset others.

FORTUNE -- There weren't too many surprises in Dell Inc.'s announcement that it has agreed to be taken private for $24.4 billion. Except for one: Microsoft's $2 billion investment will come as a loan, instead of as equity.

A source familiar with the situation tells me that the software giant was worried about other customers thinking that Microsoft (MSFT) had incentive to value one over another, so it chose not to take an equity position.

That said, Microsoft also realizes that it may have created a slippery slope. For example, what if another customer requests involvement in a take-private or other sort of financing event? If Microsoft declines, then is clearly would seem to be valuing one customer (Dell) over another.

Seems Microsoft decided that helping Dell (DELL) survive and prosper was worth that latter risk, although it is expected to at least listen to any future requests. Moreover, Dell is unusual in its importance to Microsoft and the broader PC market -- with only Hewlett-Packard (HPQ) and Lenovo selling more personal computers.

In a brief statement about its investment, Microsoft said the following:

"Microsoft has provided a $2 billion loan to the group that has proposed to take Dell private. Microsoft is committed to the long term success of the entire PC ecosystem and invests heavily in a variety of ways to build that ecosystem for the future. We're in an industry that is constantly evolving. As always, we will continue to look for opportunities to support partners who are committed to innovating and driving business for their devices and services built on the Microsoft platform."

It also is worth noting that this isn't the first time Microsoft has worked with Silver Lake Partners, the private equity firm leading Dell's acquisition. In 2011, Silver Lake sold Skype to Microsoft for $8.5 billion. I'm told the existing relationship was valuable to Microsoft's participation in the Dell transaction, but was not its genesis.

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Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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