Dell's raising of $1 billion through selling bonds and its hiring of a merger-and-acquisitions specialist from rival IBM have industry observers believing that it is about to start buying some companies. Reports have sources saying that Dell officials are expecting to buy a large company this summer, and at least one analyst says that it would be smart for Dell to grow its business through acquisitions as it looks to keep up with aggressive rivals such as IBM and HP.
Dell is making moves that have industry observers believing the company is on the verge of making some acquisitions.
Dell officials have said in the past that they are interested in
buying companies, and apparently they're building up its cash reserves.
The company on June 10 sold $1 billion in bonds, adding to the $9 billion it already has on hand, according to a report in the Wall Street Journal
Add to that Dell's hiring of IBM mergers and acquisitions specialist
David Johnson and the aggressive acquisition approaches by such rivals
as IBM and Hewlett-Packard, and the pieces are getting put in place for
a push by Dell to jump back into the acquisition game, analysts say.
IBM has sued Johnson to stop his move to Dell, and he reportedly is
working for Dell outside of the M&A space.
Dell spokespeople have said that the raising of the money through
the bond sales was for general purposes that could include buying
companies, among other reasons.
However, the WSJ quoted an unnamed source as saying that CEO Michael
Dell is expecting to buy a large company, though the source wasn't
specific about which company. Businessweek
a list of six possible acquisition targets, including BMC Software, EMC
and Symantec, as well as Palm and Motorola's phone business in the
Dell, which has had disappointing earnings reports over the past few
years, has bought 10 companies over the past three years, which is
fewer than such rivals as IBM and HP. However, Charles King, an analyst
with Pund-IT Research, said it makes sense for Dell to start looking to
grow through acquisition.
The economy is making it attractive for IT vendors to grow their
product portfolios and customer bases by buying other companies, King
said, and some companies have taken advantage of it.
"IBM and EMC have been more aggressive in their acquisition
strategies and have been more successful than a lot of others," King
However, while Dell hasn't cast a wide net, it has shown that it
can buy a company and successfully merge it, particularly with its $1.4
billion purchase of EqualLogic in 2007
It gave Dell a solid footprint in the iSCSI world and a nice complement
to its work with EMC in the enterprise storage space, King said. Dell
also has built out its services offerings through acquisitions of Everdream in 2007
He said he could see Dell buying companies that help it grow its
cloud computing strategy, which will build on the partnership Dell
announced with Cisco Systems in January around data center management.
The company also rolled out its Dell Management Console in March, which
is built upon Symantec's Altiris Management Platform.