Dell in talks to buy storage vendor Compellent

Dell gives no assurances the roughly $900 million deal will be completed

Dell said Thursday it is in advanced talks with storage vendor Compellent Technologies regarding a merger that would call for Dell to pay US$27.50 per share, or roughly $876 million, for the company.

The companies gave no assurances that a deal will be consummated, and said they do not plan to make additional comments "until an agreement is reached or discussions are terminated."

Dell's offer falls significantly below Compellent's closing share price on Wednesday of $33.65.

The storage market has been heating up of late. Earlier this year, Dell lost a bidding war for storage vendor 3Par to Hewlett-Packard, and last month EMC said it would pay $2.25 billion for Isilon Systems.

Companies around the world are ramping up spending on storage to handle exploding data volumes. Global disk storage systems revenue during the third quarter was $7 billion, growing by 18.5 per cent compared to the third quarter last year, analyst firm IDC said last week.

The worldwide storage software market is showing momentum as well, seeing third-quarter revenue of $3.1 billion, an 8.7 per cent jump over the same quarter last year, IDC said Tuesday.

Dell's intentions for Compellent came as no surprise to Forrester Research analyst Andrew Reichman. The loss of 3Par was "a huge motivating factor" for Dell to make a follow-up deal, he said.

"However, 3Par was a pretty proven, top-tier enterprise storage play," whereas Compellent has had a presence in the SMB market, Reichman said. Its products have are very good in terms of automation and ease of use, "but it has not really cracked the glass ceiling into the enterprise," he said. Compellent also has some overlap with Dell's own EqualLogic products, he added.

One big advantage Compellent has over EqualLogic is Fibre Channel networking technology. EqualLogic is iSCSI-only, Reichman pointed out. "Fibre is the enterprise standard. However, [Compellent] doesn't have massive scalability or massive performance."

Dell's deep pockets could potentially help Compellent engineers build out enterprise-grade functionality, he added. But it's an open question as to what will happen, since Dell "has not really been a visionary leader in storage," he said.

Overall, Compellent's road map may not see huge changes under Dell, he said. "The bigger challenge for Dell is whether they can independently sell storage to enterprises. It's not an easy thing to do."

To that end, Dell's relationship with EMC as a reseller of its high-end Symmetrix product as well as the midrange CLARiiON line will likely fade if the Compellent deal is completed, said Mark Peters, senior analyst at Enterprise Strategy Group.

In any case, Dell had already made its competitive intentions clear by going after 3Par, Peters added.

Meanwhile, Dell users committed to using EMC are "probably going to be very cautious and not thrilled in the short term," he said.

Compellent investors aren't thrilled with the news either. Shares of the company fell 13 per cent to $29.31 in early trading Thursday.

While Dell will probably end up raising its offer for Compellent, it's unclear whether the company will be subject to a bidding war like that which engulfed 3Par, Reichman said. One potential suitor could be Cisco but even that is far from certain, he said.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags business issuesciscoDellstorageemcHewlett-Packardnetwork-attached storageIsilon3PARmergers & acquisitionsCompellent Technologies

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Chris Kanaracus

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?