Microsoft factors the future into its Dell-iberations

If Microsoft is not prepared to take a bet on the PC, then who is?

This explains why the world's biggest software company is now considering dipping into its $67 billion of cash reserves to back a buyout of Dell, a casualty of the fierce wars raging in the hardware industry.

Even as a pure financial investment, this would probably have a lot going for it. As we pointed out here this month, before news leaked that Michael Dell is attempting to lead a buyout of the company he founded, the PC universe has become a solid if dull place for widows and orphans to park their cash: both Microsoft and Intel offer dividend yields that are more than twice the level of US Treasuries.

Of course, the investment return is likely to be a distant second in Microsoft's considerations. As cheerleader-in-chief for the flagging industry that was built on Windows, it is time to step forward with more tangible demonstrations of support to help the industry over the chasm that has opened up with the arrival of touchscreen computing.

The array of bets Microsoft is currently placing on hardware shows that it has learnt from earlier misadventures.

The Zune music player was a misbegotten attempt to follow the iPod into consumer devices where Microsoft's main asset – the Windows platform – could not be brought into play.

The Xbox games console has had more success at creating an entirely new platform for a different set of software developers, although at huge cost over more than a decade.

Its latest round of hardware investments, by contrast, show an attempt by Microsoft to defend its castle.

Like a feudal lord, it once milked a peaceful populace, collecting generous taxes from the industry that laboured to keep the Windows economy going. The farmers never starved, but it was Microsoft that grew fat. Now, with the enemy at the gates, it has had to extend the succour and protection that is implicit in such feudal relationships.

A Dell deal would leave Microsoft's bets on Windows hardware spanning the gamut, from direct intervention to more passive financial support.

They include Surface, the tablet that is Microsoft's first attempt at making a PC-like device. The first stripped-down version of the machine, called Surface RT, looks to have flopped so far. But the real battle against the iPad for Microsoft's all-important business users will be joined in early February with the launch of a Pro version.

A close design partnership with Nokia has given the software company a second way to extend its influence into hardware. Its willingness to put its cash behind the Finnish company's revamp of its smartphone line to showcase Windows software was one reason Nokia signed up to the deal.

Backstopping a Dell buyout by contributing a slice of mezzanine finance – the structure currently being discussed – would amount to another, albeit far weaker, involvement in the hardware business. If the securities that Microsoft is considering buying come with conversion rights into common equity, it might at least get a direct seat at the table at some point in the future, but in the meantime its influence would be muted.

This raises a question: why do it at all? Since Microsoft has been willing to roll its sleeves up and try to set a new leadership in tablet and smartphone hardware, why take a back seat in its most strategically important market, the PC?

A more direct intervention in the PC market could have disruptive consequences. Some of Microsoft's old hardware allies are already feeling bruised from its incursions on to their turf. The Surface, announced at the very moment that the rest of the PC industry was gearing up for last year's launch of Windows 8, already risked alienating important partners.

Nokia must also be sweating with the knowledge that, should its Lumia Windows phones bomb, Microsoft surely has a plan B in the form of a Surface Phone ready to go. Even if the Lumia is a success, a wider family of Surface touchscreen devices of all sizes, to rival Google's family of Nexus screens, looks distinctly likely.

Siding too closely with Dell would risk tipping Microsoft's uneasy relationships with its Windows allies into all-out war. But it cannot afford to stand back. The rainy day against which it has been piling up cash reserves for the many good years has finally come.

Richard Waters is the Financial Times' West Coast managing editor.