Michael Dells Buying Spree

By Scott Ferguson  |  Posted 2008-01-31 Print this article Print

For years, Dell avoided acquiring companies, but circumstances have changed and in order for the company to grow, analysts say they believe a spending spree was needed and that Michael Dell's shopping list helped Dell in two key areas for enterprise customers.

The $1.4 billion purchase of EqualLogic shored up Dell's storage division and stands as the largest purchase in company history. Dell already had a deep relationship with EMC, but the EqualLogic move reinvigorated its internal storage division, which had fallen behind rivals Hewlett-Packard and IBM, and gave it a strong foothold in the growing field of iSCSI storage.

"What really has impressed me," King said, "is that since Mike Dell's return, the company has moved forward with some very specific products and has made bold changes through acquisitions, which it had never prided itself on before."

On the other side, the acquisitions of SilverBack Technologies, Everdream and ASAP Software have helped Dell extend both its nascent channel offerings and its services divisions, which had lagged behind its competition for years.

Steve Baker, an analyst with the NPD Group, said in the next year Dell has to not only keep up with its channel strategy to ensure that works and gets better as time passes, but also has to keep up with its acquisitions and then integrate those parts into the company's portfolio.

"In terms of acquisitions, they really don't have the time to sit back and absorb what they did," Baker said, adding that Dell will likely continue to focus on acquisitions that help it with storage and with services. "They have to constantly make sure these acquisitions are worthwhile and help the company keep up with the pace of technology. Dell has to keep its foot on the accelerator in order to keep up its advantage."

Losing Dell's religion

Perhaps the most controversial move by Dell in the last 12 months was its embrace of a channel program after having preached a direct sales model since the company began. Besides technology and services, the acquisition of EqualLogic and other companies played into channel strategies as well.

The program that Dell developed over the course of 2007 includes a deal registration component protecting deals of $75,000 and greater, and other benefits for partners. Yet EqualLogic, SilverBack and potential Dell reseller partners remained skeptical. Many told eWEEK that they were adopting a wait-and-see approach to their relationship with the PC maker. The test of the program in gaining channel partner trust would be in the execution.

"It will take time, consistency, commitment, communication and a willingness to work in collaboration with the channel and not in conflict," said Tiffani Bova, research director of IT Channel Sales, Programs and Alliances for research firm Gartner. "It has to happen from the senior levels of the company all the way down to an inside sales rep. Inconsistency or sales efforts which do not align to this new effort will quickly hinder Dell's ability to gain trust from the channel."


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