Dell announced that it has entered into a definitive agreement to purchase the data storage provider EqualLogic for approximately $1.4 billion in cash.
Dell, the second largest PC maker in the world, made the move to help further distance itself from its reliance on direct sales. The price tag that Dell has agreed to pay for EqualLogic, a company specializing in iSCSI storage area network virtualization technology, would make this the most expensive acquisition in Dell's 23-year history.
In addition to gaining EqualLogic's virtualization technology that helps increase the efficiency of data storage, the acquisition will also give Dell access to EqualLogic's strong channel partnerships and relationships with over 500 channel partners and 3,000 customers.
"Our customers will be dealing with the largest increase in data we have seen in our history over the next few years," said Michael Dell, Chairman and CEO, Dell. "Leading the iSCSI revolution will help Dell accelerate IT simplification and virtualization and will drive the Dell value proposition into more areas of the enterprise storage business," Dell said.
Obviously, Dell saw the need to create its own iSCSI arrays and not simply depend on EMC to provide these types of offerings. This new push into the storage market represents the latest attempt for Dell to reach out to small and medium sized businesses with products designed specifically for that market. And this could be bad news for other companies in this space like Compellent, FalconStor, Left Hand Networks and Network Appliance who are competing for these same dollars in the small and mid-sized enterprise markets.
"Dell's acquisition of EqualLogic adds further momentum to the market for network storage solutions that support iSCSI." said Phil Soran, Chairman and CEO of Compellent. "We agree with Michael Dell's statement that our customers will be dealing with the largest increase in data we have seen in our history over the next few years. We believe that the simplification and virtualization of storage needs to be an essential element of any storage vendors' market strategy."
Soran continued, "The path to the virtual data center, though, should be lined with storage area network (SAN) products that offer simultaneous support for both iSCSI and FC server connections. A flexible approach to connectivity allows businesses to optimize their storage resources and select the right technology for each application, rather than being forced into a connectivity choice that may not work best for their business."
LeftHand Networks' president and CEO had this to say, "Today's Dell/EqualLogic announcement clearly validates the market for iSCSI SANs and sets a premium valuation for the market leaders. It also establishes LeftHand as the largest independent iSCSI SAN vendor." He added, "Inquiries about LeftHand's Advantage Partner Program have been brisk. LeftHand has strong channel relationships and remains 100 percent committed to our partners' success, without introducing potential channel conflict."
Dell said it expects the acquisition to close late in the fourth quarter of Dell's fiscal year 2008 or early in the first quarter of fiscal 2009. The purchase would cut earnings per share by between two cents and five cents cumulatively over Dell's fiscal 2009 and 2010. The acquisition has already been approved by each company's board of directors and is subject to regulatory approvals and customary closing conditions.