Dell Has a Method to Its Acquisition Madness

News Analysis: The acquisition of SonicWall gives Dell a powerful set of products and services to compete with Cisco Systems, Juniper Networks and HP in the enterprise switching and services business.

One could describe Dell as acquisition-crazy and not be far off the mark. It has now captured two new companies in three weeks and 13 in the last two years, if you're keeping score.

That's a lot of new-generation IT to uproot and move inside a company firewall. However, Dell has a system on how to do this and is pretty picky about what it acquires. Michael Dell told eWEEK during a visit to Round Rock, Texas, last summer that his company, led by Senior Vice President of Corporate Strategy Dave Johnson, might look at up to 250 companies a year for possible acquisition and will settle on maybe seven or eight.

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So if you're one of the seven or eight, you're obviously high on the charts in your sector.

Of course, Dell's competitors in the full-service IT products and services business are doing the same thing. EMC, Oracle, Hewlett-Packard and IBM (well, not so much lately) have all gone through similar asset-collecting binges. In fact, EMC may have set a record of sorts in the 2006-2010 time span with 34 companies added to its roster.

Innovation Happens, but Usually Elsewhere

The fact is, mammoth companies like these€”even with all the research and development resources they already have in place€”cannot keep up with all sectors in IT evolution. Innovation tends to happen elsewhere, and current standards now morph into something better so quickly that industry leaders have to buy ready-to-use IT and plug it into their existing catalogs.

This is what Dell did March 13 in picking up SonicWall, a strong SMB-midrange play in the threat management software business. Oh, by the way, SMBs and midrangers are also where Dell is strongest.

Unified threat management (UTM) is a relatively new product/service category that includes firewall, intrusion prevention, virtual private network, data leak prevention, gateway antivirus, email security, Web security and application control. IDC estimated the UTM market to be worth about $2.4 billion in 2011 and expects it to grow at a 13 percent CAGR (compounded annual growth rate) through 2015.

Terms of the SonicWall deal were not disclosed, but Wall Street's Jefferies & Company estimated Dell paid between $1 billion and $1.5 billion in cash. That's not a trivial check to write, even at today's inflated rates.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor of Features & Analysis at eWEEK, responsible in large part for the publication's coverage areas. In his 12 years and more than 3,900 stories at eWEEK, he...