Dell agrees to buy Compellent for $960M

Dell has agreed to pay $27.75 per share for Compellent, a little more than it discussed last week

Dell has agreed to buy virtualized storage vendor Compellent Technologies in an all-cash deal worth US$27.75 per share, a little more than the $27.50 per share price tag it was discussing with the company last week, but still lower than the stock's Monday-morning opening price of $28.30.

Dell hopes to expand its range of enterprise storage products with Compellent's virtualized storage products, which offer thin provisioning and tiering.

The new price tag values Compellent at around $960 million, and puts the cost of the deal to Dell at about $820 million, net of Compellent's cash. The companies expect to complete the deal early next year, if Compellent's shareholders approve it.

Whether they will get the chance remains to be seen. The last time Dell bid on a big storage vendor, it ended up in a bidding war with Hewlett-Packard. The price of its acquisition target, 3Par, more than doubled in just a few weeks.

However, analysts said last week that counterbids are less likely, since the incumbent players in storage have already built out portfolios. It might be more likely that vendors such as networking giant Cisco will submit offers as they look to diversify.

Overall, the storage market is becoming red hot as companies around the world grapple with rapidly expanding data volumes. Global disk storage systems revenue during the third quarter was about $7 billion, increasing by 18.5 percent compared to the third quarter last year, analyst firm IDC said recently.

The worldwide storage software market is exhibiting strength as well, with third-quarter revenue of $3.1 billion, an 8.7 percent jump over the same quarter last year, according to other IDC figures.

Dell executives cited those trends during a conference call Monday.

"Data creation is exploding. Our customers are struggling to manage and store their content," said Dave Johnson, Dell senior vice president of corporate strategy. The Compellent deal will complement past acquisitions Dell has made to build a comprehensive storage lineup, which include EqualLogic and Ocarina, he said.

The storage sector is afflicted by too many point products that don't work well enough together, said Brad Anderson, senior vice president of enterprise products at Dell. Customers want a technology set that allows them to easily move data from primary to secondary storage, and eventually archive it, as well as perform tasks like deduplication, he said. "You can't accomplish this when you have all these point solutions that are all incompatible with each other."

Analysts have said there is considerable overlap between EqualLogic's target audience and Compellent, as both cater mostly to midmarket companies. However, Compellent does provide Fibre Channel-based networking, a widely used enterprise standard, while EqualLogic provides only iSCSI connectivity.

Although Compellent is "in a slightly different place" compared to 3Par, it has had "very good success against 3Par, and also covers the midrange even more effectively," Anderson said.

He noted that Compellent has been "doing many of the same things as EqualLogic in terms of virtualization and automated tiering." It will take multiple product generations but eventually many of Compellent's technologies will be extended across the broader portfolio, he said.

Compellent has 2,500 customers and 490 employees, and logged about $125 million in revenue during 2009. It has sold its products entirely through channel partners. That program will be maintained and improved, but Dell has also signed a reseller agreement with Compellent to sell its products directly.

The agreement is meant to help Dell sales teams learn about Compellent's products and spread the word to customers prior to the deal's closing, Johnson said.

Meanwhile, Dell's move to buy Compellent is expected to put a damper on its partnership with EMC. Under that agreement, Dell sells EMC's high-end Symmetrix product as well as the midrange CLARiiON line.

EMC and Dell have been in discussions, and will "continue to support those [joint] customers as they want to be supported," Anderson said.

While Compellent will give Dell a solid hand in the storage market, it will remain open to additional acquisitions, executives said.

Join the newsletter!


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 issuesDellemc3PARMergers / acquisitionsCompellent Technologies

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

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

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.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

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?