Potential Targets Abound for Dell Buying Spree

Analysts speculate on which companies might be ripe for a buyout now that Michael Dell says he is ready to go shopping.

During a tour of Japan this week to promote Dells "simplify IT" initiative, Michael Dell indicated that it might be time for his company to go on a buying spree.

"I would not be surprised if the nature and pace of acquisitions increases somewhat in the future," Dell said, according to several news accounts of Dells remarks during an Oct. 29 press conference.

Since returning to the helm earlier in 2007, Michael Dell has looked to improve Dells sagging fortunes through a combination of cutting-edge technology, engagement of the channel and retail sales.

If the next stage of bringing Dell back will be to focus on buying other companies, the question becomes, What types of acquisition are in Dells future?

Industry analysts contacted by eWEEK offered a variety of opinions on what companies Michael Dell and his management team could be looking at during the next several months. The analysts agreed that Dell could pick up several companies on the enterprise side, as it did earlier this year with SilverBack Technologies and ASAP Software, to help strengthen its services portfolio, a lucrative field that nearly every OEM is looking to invest in.

"Dell is a $50 billion-a-year company and while thats not as large as IBM or HP [Hewlett-Packard], they are a mature vendor and one way to grow is developing new options for existing customers and looking into areas to grow in order to gain new customers," said Charles King, an analyst with Pund-IT Research.


Dell is gaining back some of its PC momentum. Click here to read more.

Within the managed services field, which can add significant margins to a companys bottom line, King said he believes that Dell will target companies that will better manage its customers desktop environments, including companies that offer ways to deliver hosted and virtualized desktop deployments.

"The desktop is pretty complex and Dell might be looking at [that area] as a way to add to its business customer services portfolio," King said, adding that Dells "streaming" computing solution, which it introduced earlier in October as a way to bring applications from the data center to the desktop, might hint at the companys plans for desktop managed services.

Roger Kay, an analyst with Endpoint Technologies Associates, also said he sees Dell expanding its services portfolio by acquiring one or several small software or infrastructure companies to add additional functionality and options to its services or management software. Kay also said he believes Dell might pick up a company to block another vendor from acquiring its technology.

"A lot of these smaller companies offer different pieces of functionality and they might want to grab some of that technology for themselves, and theres lot of these small and private companies within the $50 million range," Kay said.


To read about Dells Linux plans, click here.

On the consumer side, one company that came up as a possible purchase was Asustek Computer, a motherboard and PC manufacturer based in Taiwan. While Kay said he did not see a lot of worth in having one PC vendor buy another, Samir Bhavnani, an analyst with the NPD Group, said Asus would help Dell gain back some of its lost market share in the consumer space, which is now considered the most important segment within the PC market.

"Asus has been on the bleeding edge of design and it offers UMPCs [ultramobile PCs], Linux-based PCs and high-end gaming systems," Bhavnani said. "One area that Dell needs to improve is with industrial design and that is one place within the consumer space that they are weak and not up to par with HP, Sony or Toshiba."

Bhavnani suggested that unlike with the March 2006 acquisition of high-end PC vendor Alienware, which remains separate from Dells other PC lines, Dell would likely incorporate Asus design prowess into a future line of notebook and desktops.


Check out eWEEK.coms for the latest news in desktop and notebook computing.