More acquisition news today. This time, from Dell (news, site) that has just announced an intention to buy data storage vendor 3Par for US$ 1.15 billion in a deal that, the buyer says, will enable it to cut enterprise data management costs by up to 50%.
While the price may be too rich for some palettes, the acquisition of the California-based company demonstrates Dell’s plans to became a major player in the cloud, while at the same time addressing critics who say it has fallen behind rivals IBM, Oracle and EMC in the software services market.
The deal also says a lot about margins in the Personal Computer market where Dell earns nearly half its revenue and which has taken a considerable beating over the past two years as the economic downturn hit SMB and home computing spending.
Dell’s Acquisition Trail
However, while the acquisition of 3Par is pushing the frontiers for Dell, it is not entirely a surprise as it has been sniffing around the data storage space since at least 2007 when it bought storage company Equallogic for US$ 1.4 billion.
Last year, it also bought Perot Systems for US$ 3.9 billion which provides information technology services and was in the top five of Fortune magazine’s “Most Admired Companies in America” list for IT Services in 2008.
Last year it also lured David Johnson, an M&A heavyweight, away from Big Blue while at the same time announcing that it was on the acquisition trail.
And only last month it added Ocarina Networks, a San Jose, Calif.-based data storage company whose technology helps reduce data management costs for an undisclosed sum. Last month too it announced that it was buying server-computer maker Scalene Systems.
What Dell Gets
In light of this , the only surprising thing about a statement from Dell last month that it intended to double the size of its data storage business, is that it had bothered even saying it in the first place.
With this acquisition it seems clear what Dell’s storage strategy is. 3Par is the last obvious product needed to provide a full storage portfolio. It now covers the SMB market with its own products, the middle sized enterprise market with EqualLogic, and now the upper and data intensive end with 3Par.
By end of the year when this deal finally closes, it will be one of the major storage gorillas in the data center market and follows the example of rivals Oracle, which also moved into the hardware market with the US$7.1 billion acquisition of Sun Microsytems and HP with its acquisition of 3Com for US$2.7 billion.
Once completed, 3Par’s 357 employees will be incorporated into Dell’s management structure but it is expected to remain as an almost independent unit from Dell, which has also said it intends to build and develop its sales and engineering teams. Dell expects 3Par to begin making money for it by the fiscal year 2012.