Dell Selling Software Unit to Francisco Partners, Elliott

By Jeffrey Burt  |  Posted 2016-06-20 Print this article Print
EMC Dell deal

The deal, reportedly worth about $2 billion, is the latest move by Dell to reduce the debt it will take on after it buys EMC for $67 billion.

Dell is selling its software business to two private equity firms as the company continues to shed assets ahead of its massive $67 billion acquisition of data storage market leader EMC.

Officials with Francisco Partners and Elliott Management on June 20 confirmed they are buying Dell's Software Group for an unspecified amount, though the New York Times said estimates are in the $2 billion range. The software business includes everything from data analytics and security software to systems and information management, data protection and performance monitoring.

"Quest Software and SonicWall provide mission-critical software to a large and loyal base of over 180,000 customers, and we see significant opportunity to build upon the company's impressive technology and product portfolio," Francisco Partners CEO Dipanjan Deb said in a statement.

John Swainson, president of Dell Software, said in a statement that the company had "built a robust portfolio of software solutions that help make the lives of customers easier," adding that employees will continue "that focus as part of the Francisco Partners and Elliott Management portfolio of companies."

The sale is the latest move by Dell executives to refocus the company as it prepares to buy EMC in the largest acquisition in tech industry history, and to lower the debt Dell will take on after the deal is completed. The deal could mean as much as $49 billion in debt for Dell.

The company in March sold its services business to NTT Data for $3.05 billion. The services unit was inherited through Dell's $3.9 billion acquisition in 2009 of Perot Systems. Since returning as Dell CEO in 2007, Michael Dell has been aggressive in buying vendors as a key part of its larger effort to build out his company's capabilities in such areas as software, security, storage, networking and the cloud. Michael Dell wants to grow his company beyond its PC roots.

Dell reportedly has been shopping such software assets as SonicWall and Quest for months. Now the entire Software Group is going to Francisco and Elliott.

In 2013, he and Silver Lake Partners bought Dell for $25 billion and took it private. Now the company is looking to buy EMC, a deal that could be completed within a couple of months. EMC shareholders are scheduled to vote on Dell's bid on July 19. The deal already has received the OK from antitrust regulators in the United States and European Union, though it is still awaiting a decision by Chinese agencies. Dell officials have said they are confident that approval from China will come soon.

EMC and its federation of businesses—including VMware, RSA, Pivotal, VCE and VirtuStream—bring with them a broad range of capabilities, from security and virtualization technologies to cloud and hyperconverged infrastructure expertise.

EMC also is making moves as the merger nears. Reports surfaced in April that the company is looking to sell its Documentum content management unit.

The news of the Software Group sale comes less than two weeks after Dell's parent company, Denali Holding, announced lackluster first-quarter financial numbers. Officials said that during the three months, the company saw revenue of $12.6 billion, down 3 percent from the same quarter in 2015, and operating income of $565 million, a 37 percent year-over-year increase. Sales for Dell Software were essentially flat, at $334 million. However, profits grew to $28 million, a turnaround from the $27 million loss it sustained a year earlier.



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