Dell reportedly is making a $2.15 billion bid for Quest Software, two weeks after talks between the two companies had broken off.
The $2.15 billion offer would be more than the $2 billion put forth by venture capital firm Insight Venture Partners two months ago, an offer that Quest officials initially agreed to in March. However, the software maker had been granted a go shop period to seek better offers, and Dell had been a company seen as having a keen interest in Quest.
Quest is a 25-year-old company whose software is designed to help businesses manage database, server and user workspaces, protect and back up data, and monitor performance. Quests business would fall in line with what Dell is trying to do as it looks to transform itself from a maker of low-margin PCs and servers into an enterprise IT solutions and services provider.
Dell and Quest have been partners since 2004.
Quoting unnamed sources familiar with the matter, Reuters has reported that Dell, the worlds third-largest PC maker, is the unidentified company referred to by Quest officials, who said June 14 that they had received an acquisition offer from a strategic bidder of $25.50 per share, a jump over the $23.86 that Quests shares closed at June 13 and which would put the deal in the area of $2.15 billion.
Dell has been aggressive in buying companies to build out its enterprise IT capabilities, making eight acquisitions over the past 12 months in such areas as storage (for example, Compellent Technologies and AppAssure), networking (Force10 Networks, SonicWall) and software (Clerity Solutions, Make Technologies). During the companys annual analysts meeting, Dell executives spoke about the importance of software in their efforts to remake the company.
John Swainson, president of Dells software group, told analysts in a Webcast talk that software is crucial to Dell becoming a complete IT solutions provider, and the companys interest is in software that can be used with its networking, server and storage offerings. However, Dell is not interested in creating an independent software business.
During the same event, CEO Michael Dell noted the importance of both software and acquisitions.
"We have a modest software business, and that's an area where we can grow rapidly," he told the analysts, adding that Dell has "some nice acquisitions, which are off to a good start."
Dells transformation isnt happening without challenges. Company executives in May reported declines in both revenue and profits in the first quarter, but said that they remained committed to their strategy. At the time, Brian Gladden, Dells senior vice president and CFO, said that while the strategy is the right one, progress would not be linear.
This is a long-term strategy and will take time, Gladden said. Were trying to move as quickly as possible in this transformation.
During the Dell Storage Solutions event in Boston earlier this week, Dell executives showed off new products that are part of the effort, including new Compellent and EqualLogic storage offerings and their Converged Blade Data Center, an integrated solution that includes compute, storage, networking and software offerings. The converged solution will challenge such products as Ciscos Unified Compute System.
Dell executives apparently are looking at Quest as another piece of the puzzle. According to Quest, Insight Venture Partners have three days to respond to the $2.15 billion offer. Insight reportedly has the right to match any other bid or adjust its own offer. Should Quest take another offer, it would have to pay Insight a break-up fee of $4.2 million or $6.3 million, depending on the timing, according to Reuters.