LAS VEGAS—When Dell bought Quest Software in July 2012 for $2.36 billion—its largest acquisition ever—and anointed it as the new crown jewel of the company, Michael Dell told eWEEK: "Dell is now an international-class software company."
Fast forward four years: On June 20 of this year, after basically renting Quest for 16 fiscal quarters, Dell changed its mind about the value of its acquisition and announced it was selling Quest to a private equity firm for $2 billion and change.
Turns out that Quest, which makes popular—though older and very targeted—developer tools that make Oracle, SAP and other databases much easier to use, among many other products, wasn't exactly the right kind of software company for Dell's tastes after all.
In October 2015, two years after Michael Dell took his company private for $25 billion, he engineered the largest IT acquisition in history, buying the EMC empire that includes VMware, RSA Software, Pivotal and several others for a whopping $67 billion.
Dell Had Tough Decisions to Make
After the deal was announced, Dell discovered he had some tough reality-related decisions to make. The company had collected a lot of good, solid intellectual property, but much of it overlapped and some, it turns out, wasn't a good match after all for the new Dell that was being created.
Several smaller divestitures were made, and then last June, Dell sold off Dell Software, which already is busy redesigning its logo and preparing to return its old Quest Software self.
Quest/Dell, however, is not a trivial business entity. It has a worldwide presence, with more than 60 offices in 23 countries with a customer base of more than 100,000. At the time of its acquisition in 2012, Quest had 3,900 full-time employees worldwide and annual revenues of $857 million.
But it's now out of the picture. In its place comes VMware, which will in effect—if not in name—become the new Dell Software.
It's All About Software for Cloud Infrastructure
People at Dell and VMware will dispute this, but it's very clear what's going to happen. With Quest leaving the Dell corral, VMware and its young cousin, Pivotal, are the new players providing the software, cloud infrastructure and services that Quest could not provide and that Dell requires to become the cloud juggernaut its founder/CEO envisions.
The company’s messaging says Dell is going to keep VMware as an independent but wholly owned subsidiary, continuing to let it do its own thing under mercurial CEO Pat Gelsinger. Businesswise, that is a fact; in practice, things are bound to be different.
Nobody questions VMware's vast reach and customer list: It's been estimated that 95 percent of all IT systems around the globe are running something of VMware's. But Dell as a corporation cannot hope to become a cloud infrastructure titan and compete with the Amazons, IBMs, Microsofts, Googles and Oracles of the world without VMware and Pivotal supplying the technical know-how.
Gelsinger and Dell, at least at this early stage, are saying all the right things—for their investors, reporters, analysts and customers.
Dell Committed to Bringing VMware Products to Market
"Dell is committed to the continued independence of VMware," Gelsinger said at a press conference Aug. 29 at VMworld. "It's more customers for us as an independent company, but more importantly, more ecosystem.
"Nowhere is the vibrance of that ecosystem more visible than here at VMworld. Two hundred fifty companies and the exhibition floor, 400 tracks, 23,000 people—we have all those things going on here. We're innovating and everybody is adding their value to it.
"That continued ecosystem commitment is an enormously powerful thing and one that Dell is supporting and encouraging. Today we talked about cross-cloud architecture and our VM Cloud Foundation, and Dell is committed to bringing that to market," Gelsinger said.
Bingo. We already have Exhibit A in this editorial case: VMware is already supplying applications, virtual infrastructure and services that Dell cannot make on its own and that it will sell along with EMC's VxRail and other converged data center hardware.
Dell, at the same press conference, said that "when you look at what we're creating, the largest enterprise systems company in the world, a company with top positions in servers, storage, virtualization, cloud software, commercial PCs, digital transformation, software-defined data centers, hyperconverged [hardware], mobility, security, we have a great opportunity to grow here and all over the world. We're really energized about our opportunities."
Fact: People Get Left Behind in Corporate Shakeups
So Dell & Co. moves ahead, making tough decisions in a major corporate shakeup, as CEOs and their corporations are wont to do. Some people get left behind in such circumstances; that's just the way it is.
What is Gelsinger's take on the idea of his company possibly becoming Dell Software II? Did Dell make a mistake in divesting a very popular developer tool company in Quest?
"Well, look at it this way," Gelsinger told eWEEK. "What software about Quest excites you? There's absolutely nothing wrong with a good set of tools for older technologies; that will stay a good business for a while. But what we're doing at VMware is transforming entire businesses; that's what Michael is thinking about."