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Dell and Compellent Technologies are in "advanced discussions" about a potential merger, the companies confirmed on Dec 9.

Even though the negotiations are still ongoing, the announcement said Dell will acquire all outstanding Compellent stock at $27.50 per share. The all-cash deal would be valued at about $876 million. Compellent main product is the Compellent Storage Center SAN, which is a combination of data storage hardware and storage management software.

"There can be no assurances that an agreement will be reached or that a transaction will be consummated," the companies said in a joint statement. "Dell and Compellent do not intend to comment further until an agreement is reached or discussions are terminated," the statement said.

Announcing the price before finalizing the agreement raised a few eyebrows, especially since Compellent shares opened at $29.87. "We think this press release puts an end to some of the speculation and resets valuation expectations," Wells Fargo analyst Jason Maynard wrote in a research note.

There has been a lot of buzz about potential mergers in the data storage market, ever since the bidding war this summer over 3Par, where Hewlett-Packard won the prize, paying $33 per share, for a grand total of $2.35 billion. Since then, speculation has swirled that Dell may set sights on storage vendors like Compellent and CommVault Systems.

The acquisition rumors have been good for Complellent’s stock price, pushing it steadily higher. Compellent shares opened at $29.87 Dec. 9, almost double its price of $15.41 on Sept. 2, the day HP announced its acquisition of 3Par.  

It’s no secret that Dell wants to expand its data center business to offer customers a combination of servers, networking, and storage, instead of relying on the commoditized PC business, or "being an OEM vendor of other people’s products," said Jeff Ready, CEO of Scale Computing, to eWEEK. Dell currently has a storage partnership with EMC, which it "put at risk" by bidding on 3Par, he said.

For more, read the eWeek article: Dell Makes $876M Offer to Buy Compellent to Expand Storage Business.