Dell, Quest Software Negotiations Break Down: Reports

By Jeffrey Burt  |  Posted 2012-06-04 Print this article Print

Dell reportedly was in advanced negotiations in late May to buy the software company as part of its transformation into an IT solutions vendor.

Dell€™s bid to buy Quest Software reportedly has broken down, just more than a week after reports said the two sides were close to making a deal.

According to reports by Reuters and BloombergBusinessweek, unnamed sources said talks between the two companies broke down late last week for unknown reasons. Sources told Reuters that despite the ending of negotiations, €œlower-level representatives€ from both companies are still in touch.

Quest, a 25-year-old company whose software is designed to help businesses manage database, server and user workspace, protect and backup data and monitor performance, has been a topic of conversation for more than two months since executives agreed to be bought by venture capital firm Insight Venture Partners for $2 billion.

Quest reportedly had been granted a €œgo shop€ period since the agreement with Insight, and several analysts said the software company had gotten interest from several top-tier tech companies, including Dell, Microsoft, Oracle, CA and BMC Software.

Dell was seen as a logical choice, given its interest in expanding its reach beyond its core PC- and server-making businesses and becoming an enterprise IT solutions provider. Software€”along with networking and storage€”plays a key role in that effort, and Dell already has grabbed other software makers to help build out its portfolio.

Dell this year bought Wyse Technology€”a longtime hardware maker that itself was shifting its focus to cloud software and desktop virtualization€”as well as Make Technologies for application modernization software and Clerity Solutions, which also is in application modernization.

Quest and Dell also have been strong partners in the past, with Quest having a page on its Website devoted to the alliance. According to the software company, the two vendors have worked together since 2004, and Quest has become one of Dell€™s top 10 partners worldwide and Dell is one of Quest€™s top five.

€œOur deeply rooted association means that we frequently collaborate heavily on planning, designing, implementing and managing hardware and software solutions for our customers to deliver powerful results,€ Quest officials say on the Website.

Those shared efforts revolve around such areas as virtualization management for desktops and servers, various Microsoft projects, application management for SAP, PeopleSoft and Java, and database management for Oracle database offerings, SQL Server and MySQL.

Dell executives have been pushing the transformation of the company for several years, trying to move it into higher growth areas to protect it against the increased commoditization of PCs and servers. It hasn€™t been easy for Dell, as illustrated by the first three months of this year. In a May 22 conference call with analysts and journalists, officials reported that first-quarter revenues and profits came in lower than during the same period in 2011, missing Wall Street analysts€™ expectations. During the call, Brian Gladden, Dell€™s senior vice president and CFO, said that despite the financial numbers, the company was committed to the strategy and that the results of the transformation would €œnot be linear. €¦ This is a long-term strategy and will take time.€

Krista Macomber, an analyst with Technology Business Research, said in a May 22 research note that the first€“quarter quarterly financial numbers shouldn€™t throw Dell€™s transformation efforts off-track.

€œThe enterprise revenue decline is not yet a significant threat to Dell€™s strategic direction,€ Macomber wrote. €œConsidering Dell€™s expansive existing install base and go-to-market know-how within the midmarket, Dell€™s midmarket customers are adopting its solutions and services ahead of enterprise sector customers.€



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