After months of speculation, Dell is buying Quest, a move that company officials said will create a foundation for Dell’s growing software business.
Dells months-long pursuit of Quest Software
is finally complete, with the tech giant announcing July 2 that it is buying
the software vendor for $2.4 billion following a bidding war with investment
firm Insight Venture Partners.
Quest will become the foundation of Dells
burgeoning software business, which itself is a key part of Dells ongoing
transformation from a maker of low-margin PCs and servers to an enterprise IT
During a conference call with analysts and
journalists, John Swainson, president of Dells Software Group, noted the
various areas where Quests software complements what Dell already is
doingfrom systems management and data backup and recovery to identity and
Were buying this [Quest] business to build
a robust [software] business at Dell, Swainson said. This is the thing were
going to build on.
Dell, the worlds third-largest PC maker, for
several months had been rumored to be courting Quest, since it was announced in
March that the software vendor had accepted a $2 billion offer from Insight
Venture. Quest officials were granted a period of time to shop around the offer
to determine whether they could find a better deal.
Over the past few weeks, they said that a new
bidder had entered the fray, with speculation surfacing that the new bidder was
Dell. The PC maker reportedly at first bid $2.15 billion for the 25-year-old
then $2.32 billion
. The $2.4 billion deal has been approved by the boards
of directors for each company, according to Swainson. The deal is expected to
close in the third quarter.
Dell over the past couple of years has been
aggressive in buying companies to build out its IT solutions capabilities, with
the acquisitions ranging from storage (Compellent, for example,) to networking
(Force10 Networks) to software (AppAssure, Clerity Solutions and Make
Roger Kay, principal analyst with Endpoint
Technologies Associates, applauded CEO Michael Dell for pushing forward on the
transformation of his company despite such challenges as a struggling global
economy and slowing sales in PCs.
Even in heavy weather, Dell continues to
execute against its strategy, Kay told eWEEK
Products from Questa company with 3,850
employees, more than 100,000 customers and revenues of more than $857
millionwill complement many of the capabilities Dell has inherited through
other deals, according to Swainson and Dave Johnson, senior vice president of
corporate strategy at Dell. For example, Quests Windows Server Management
software will dovetail with application modernization capabilities Dell gained
through Clerity and Make. Quests Foglight performance monitoring software will
mix well with systems management solutions from Dells acquisition of Kace,
while Quests Workspace and One user workspace and identity and access
management offerings will support what Dell acquired from SonicWall and
Swainson said Dell will work to keep the
Quest business as intact as possible as it integrates into Dells software
business. That follows what Dell has done with other companies its bought,
according to Endpoints Kay. He compared it with other vendors, such as Cisco
Systems and EMC, which tend to buy a company, bring it into the fold and let
its products compete with others that already are in-house, then pare away what
Instead, Dell executives determine the type
of company it needs to fill a particular hole, negotiate to keep it intact and
then integrate it into the business.
Dell looks at its whole business and says,
What dont we have? Kay said. Considering that Dell is building its
software business, theres a lot they dont have.
He said Quest is a large bauble on Dells
acquisition necklace, which otherwise has some smaller stones on it.
While Dell has pushed forward with its
strategy to become a more complete IT solutions provider, it hasnt been easy.
In May, the company reported that revenue for the quarter had fallen 4 percent,
and profits fell 33 percent. However, Dell officials noted that revenue for the
company's Enterprise Solutions and Services Group grew 2 percent, and now
account for 31 percent of Dells revenue and half its gross margin. At the same
time, revenue for Dell-owned storage products jumped 24 percent.
During a conference call in May to discuss
the quarterly numbers, Brian Gladden, Dells senior vice president and chief
financial officer said that the transformation would not
and that this is a long-term strategy and will take time. ¦
Were trying to move as quickly as possible in this transformation.