Two weeks ago, amateur analysts and the media were handicapping a union of Dell (NASDAQ:DELL) and Microsoft (NASDAQ:MSFT) via a buyout-consortium because, well, Dell was allegedly a buyout target and it was fun to dissect the pros and cons of all the possible corporate combinations.

Now though, it looks like Dell/Microsoft/private equity deal is really going to happen.

Expert observers say the total price tag to take Dell private should be somewhere in the $24 billion range, explaining how the struggling computer maker’s market cap has grown from $16 billion just four weeks ago to something closer to the suggested buyout price now. And it’s possible a deal could be done by the time you read this.

So what’s the verdict? It’s clearly the best of a tough situation for faithful DELL owners, who have watched their stock disintegrate since 2005 as the PC industry was unraveling. For Microsoft shareholders or Silver Lake — the private equity firm piecing the deal together — however, this might or might not be a boon.

Upside

The pros and cons of such a deal have been opined to death, so no need to detail them again — broad brush strokes will do. Simply put, the biggest and best reasons Microsoft would want a piece of Dell are:

• It brings together software and hardware under one roof, and keeps a key outlet in business (though Hewlett-Packard [NYSE:HPQ] and Lenovo [PINK:LNVGY] are still bigger distributors of Windows operating systems).
• The union gets Microsoft deeper into storage and consulting; 40% of Dell’s revenue stems from consulting, service and storage.
• Dell’s bonds/debt might be a better-than-market investment for part of Microsoft’s $66 billion in cash.
• It’s a prelude to Microsoft diving deeper into the smartphone or tablet business. The Microsoft Surface tablet has been, shall we say, less than warmly received, as Dell’s foray into the smartphone and tablet business has been. Perhaps the two combined companies could finally put something together than makes a dent in the dominance enjoyed by Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG).

That said, there’s also an upside for Dell in the deal. By going private, Dell can make its transition away from the PC business and toward the enterprise-level business without being scrutinized by shareholders every step of the way.

Downside

There are two sides to every coin, however, and the downsides for Microsoft are almost as numerous as the upsides. The possible detrimental impacts include:

• Alienating original equipment manufacturers (OEMs) even more so. The launch of Microsoft’s Surface tablet made the company a direct competitor with many of its partners it supplied operating system software for. Now teaming up with a PC maker may make other PC companies irate.
• Dell doesn’t necessarily want Microsoft calling the shots. In fact, Dell has reportedly been adamant about Microsoft owning a minority share in the company, and ensuring that Microsoft doesn’t become a meddling partner. That shouldn’t be tough to muster, since Michael Dell still would be the largest owner, and Silver Lake would be the next-largest stakeholder. It just begs the question, however … would such an arrangement even be worth Microsoft’s time and trouble?
• If Dell is specifically looking to get away from the waning PC business, even a loose partnership with Microsoft might mean conflicting agendas (though Microsoft is wading deeper into server and enterprise-level solutions already).
• Dell doesn’t have a great deal of PC-manufacturing capacity relative to its competitors. It can outsource, but that’s logistically tough to do. If Microsoft is aiming to revive the PC industry by being its centerpiece, this is a tough route to take.

Bottom Line

Combining two struggling companies don’t necessarily produce one good one. Oh, sometimes it works out quite nicely, but this doesn’t appear to be one of those times.

The good news/bad news is, with Microsoft’s reported $2 billion to $3 billion impending stake in the acquisition, it wouldn’t have any real muscle/control over the new Dell anyway.

This privatization is mostly for the benefit of Silver Lake and Michael Dell, who can now direct the reorganized company as he deems fit. So far, that’s been further away from the waning PC business, and closer to storage, services and servers. Microsoft wants to go there too, but beyond the ability to put the name “Dell” on its hardware, this union doesn’t even offer Microsoft something it can’t — or isn’t already doing — on its own. It’s unlikely that a game-changing tablet or phone is in the pipeline.

Simply put, this is all a boon for Dell shareholders, and something of a non-event for Microsoft and its shareholders. As for Silver Lake, it stands to be the real winner here, provided Dell can profitably make the corporate overhaul it has been needing to make for a while.

That might mean a savvy dismantling of Dell as we know it, but it’s that same dismantling that will work against Microsoft if it’s hoping for anything more than just something to do with idle cash.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.