Tuesday, December 14, 2010

What is worth $960 Million?

Dell agreed to buy data storage company Compellent Technologies for about $960 million in cash, to expand beyond PCs and catch up with rivals Hewlett-Packard and IBM in technologies like cloud computing according to an article on CNBC.com

Shares of Dell were lower Monday after it announced that it would offer $27.75 a share for Compellent, a price that is about a 3 percent discount to Compellent's closing price on Friday on the New York Stock Exchange.

Monday's deal was widely expected after Dell and Compellent announced last week that they were holding "advanced discussions." At that time, Dell said it would bid $27.50 a share.

In an attempt to position themselves for an economic recovery and become "one stop shops" for corporate clients' technology needs, Dell, HP, and International Business Machines have chased deals in the past year. Three months ago Dell lost out to HP in a bidding war for another storage firm, 3Par.

Dell sees the Compellent deal, expected to close in early 2011, adding to its adjusted earnings in fiscal year 2012, it said on Monday.

Data storage plays a crucial role in cloud computing, the accessing of remote computing power and data over the Internet. Dell entered this market in 2008 with its purchase of EqualLogic.

Compellent specializes in storage and recovery of data for small and medium-sized businesses, compared to the high end business targeted by 3Par. Dell said it plans to keep Compellent's existing operations in Eden Prairie, Minnesota.

While some analysts have said Dell did well to settle for the more affordable option, others have said Compellent, unlike 3Par, is not capable of addressing the needs of customers with large data centers.

Some analysts and bankers say NetApp could also be a target, but at a market capitalization of nearly $20 billion, they say it could be too big and the major technology companies have already bought storage technologies.


Joe Carretta



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