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7/1/2009
08:37 AM
Bob Evans
Bob Evans
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Dell Needs To Make An Acquisition -- But Which One?

In a rapidly changing IT market, Dell has stood pat for a while as competitors have jumped into virtualization, the cloud, software, networking, and services. A few financial analysts feel Dell needs to quickly regain the confident aggressiveness that made it a global powerhouse earlier in this decade, and here are some acquisition targets they think will enable Dell to make that leap.

In a rapidly changing IT market, Dell has stood pat for a while as competitors have jumped into virtualization, the cloud, software, networking, and services. A few financial analysts feel Dell needs to quickly regain the confident aggressiveness that made it a global powerhouse earlier in this decade, and here are some acquisition targets they think will enable Dell to make that leap.Bernstein Research's Toni Sacconaghi opined this week that Dell would do well to enter any one of those new areas by pairing up with one of these candidates, reports SeekingAlpha.com: --Acer to enhance its global hardware brand --Perot Systems for services --Salesforce.com as a software partner to push a broad platform for lowering the cost of infrastructure --CommVault or Compellent to enhance Dell's position in enterprise storage --or 3Com to give it some networking muscle.

Two weeks ago, UBS analyst Maynard Um offered the following list of targets that Dell might pursue, but then pretty much dismissed each except the last two: --CSC for services (too expensive) --ACS for services (too expensive) --Perot Systems (too expensive) --Unisys (too uncertain) --Citrix (too expensive) --McAfee (too consumer) --Acer (too PC) --Palm (too gadget) --CommVault (this one would be manageable!) --3Par (another manageable suggestion!) --WalMart, to provide retail distribution (JUST KIDDING!! I tossed this one in because, since Maynard's list seemed to be mostly companies that Dell would not be buying, I figured WalMart qualified.)

And late last year, SeekingAlpha.com notes, Avian managing director Avi Cohen put together this shopping list for Dell: --Sun --CommVault --Compellent --3Par --Data Domain

Since this list from Avian came out, Oracle has snapped up Sun, and Data Domain is entangled with offers from EMC and NetApp. That leaves CommVault as the only acquisition target named on all three analysts' lists.

I think CommVault's a great company with great products and in a lot of ways it could be a strong pickup for Dell, but I think it would be more of a tactical play for Dell rather than a strategic one because Dell's already in the storage business so the addition of CommVault would be an enhancer rather than a game-changer.

The concern among those analysts - and the reason behind their matchmaking efforts - is their concern that Dell is becoming mired in hardware-driven businesses that have become or are turning into commodities. Meanwhile, Dell's got only limited presence in the emergent areas mentioned at the top of this piece, such as virtualization, cloud computing, and services.

It's in those areas where Dell can make an impact by showing customers and competitors alike that it's going to remain a significant force to be reckoned with in the broad enterprise space for the foreseeable future. The alternative is to glide slowly down a path from strategic partner to tactical commodity vendor, and that way irrelevancy lies.

If I had to bet, I'd say Perot Systems and Dell will be having some very interesting conversations this summer - they could form a very strong combination and give each other vital new capabilities in the demanding enterprise-IT market that's taking shape around us.

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