Dell has agreed to buy virtualized storage vendor Compellent Technologies in an all-cash deal worth $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."