What's Behind Dell's Acquisition Madness?
EUC with HCI: Why It Matters
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.
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.
For a billion bucks and change, what will San Jose, Calif.-based SonicWall bring to Dell that it previously lacked? And does this pretty much do it for Dell and its data center networking security, or are there still some holes to fill?
"There are always holes to fill," Forrester Research Principal Analyst of Security and Risk Management John Kindervag told eWEEK. "This gives them a very powerful set of products and services to compete with Cisco Systems, Juniper Networks and HP in the enterprise switching and services business.
"Prior to this they bought Force 10 (switching), Perot Systems (consulting) and SecureWorks (Managed Security Services). With the acquisition of SonicWall, they have a very fast gateway product that has both firewall and IPS features, which places it squarely in the Next Generation Firewall Market (NGFW). These types of multifunction gateways are foundational to future-state secure network design."
Kindervag said SonicWall always made a good product but it had an image problem.
"It was perceived as a midmarket solution that didn't resonate well with enterprise-sized organizations," Kindervag said. "Dell has the marketing savvy and sales force to make SonicWall an enticing choice for a new level of buyers.
"It also provides new competition for current NGFW leaders such as Palo Alto Networks and Check Point Software which can only be a good thing, as increased competition should drive innovation."
Will Quest Software Be the Next Acquisition Target?
Jefferies & Co. had an interesting take on the deal and, in fact, dropped a clue as to who might be Dell's next acquisition target.
J&C on the strategic impact of the SonicWall deal: "We believe Dell will be able to leverage its distribution and customer relationships to sell more SonicWall product. We think this adds more tools to Dell's cloud stack but that a more unified offering is unlikely before CY13."
J&C on the implications of the deal regarding Quest Software: "While the size and timing of the SonicWall deal reduces the odds that Dell will make a bid for QSFT, we note that SonicWall's products do not overlap with Quest's. We think Dell is likely taking a look at QSFT during the current 60-day shopping period and that the company would fit well with Dell strategically."
Hmmm. Quest Software, eh? Sixty-day shopping period? Neither company can talk, of course. Aliso Viejo, Calif.-based Quest makes a lot of popular tools (TOAD, Foglight, NetVault and QuickConnect are the best-known) that Dell could use in its quest (pun intended) to help its customers move to private and hybrid cloud deployments.
There's more where all this came from. Keep tuning in.
IT Solutions Builder TOP IT RESOURCES TO MOVE YOUR BUSINESS FORWARD
Which topic are you interested in?
What is your company size?
What is your job title?
What is your job function?
Searching our resource database to find your matches...