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Dell’s Shopping Spree. Is Networking Next?

Could Dell be in the market to acquire a networking company in an effort to build its data center product line to compete with the likes of Cisco and HP? That may very well be the case. Dell’s global head of the Enterprise Architecture certification group recently told Channel Insider that Dell is planning to […]

Written By: Jessica Davis

Mar 23, 2010

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Could Dell be in the market to acquire a networking company in an effort to build its data center product line to compete with the likes of Cisco and HP?

That may very well be the case. Dell’s global head of the Enterprise Architecture certification group recently told Channel Insider that Dell is planning to add a number of new competencies including virtualization, power and cooling and networking. For networking products from Dell?

“Could be,” said Bob Skelley, but added that “It’s too early for us to share specifics on that. Soon we’ll be able to talk about those.”

What companies might be in Dell’s sights? Click here to find out.

While Dell has in-house server/compute and storage products, it is missing the networking products. To fill out its missing component, Dell has partnered with Brocade. Meanwhile, Michael Dell has commented in the last year about Dell’s acquisition aspirations around the data center space.

As HP and Cisco have filled out their data center architecture portfolios by adding networking in the case of HP and acquiring 3Com, and by adding servers in the case of Cisco, Dell has focused on partnering with other companies. But Dell has also pursued acquisitions. For instance, a year after HP acquired IT consulting firm EDS, Dell announced plans to acquire IT consulting firm Perot Systems.

“ Dell tends to be tightly focused on what HP is doing, and now that HP is expanding their networking coverage [most recently through the 3Com acquisition] Dell is likely to look into that as well,” industry analyst Rob Enderle told Channel Insider. “Convergence will become a very real problem for firms who can’t provide all the pieces when Cisco’s and HP’s product suites get filled out.”

Enderle pointed out that Toshiba lost out on a lot of business because it initially didn’t have servers and then it didn’t have desktops. That meant it couldn’t participate in the increasing number of bids that blended those products, according to Enderle. Now, as tech giants such as HP and Cisco offer these integrated data center solutions, those vendors who can’t offer them could lose out, Enderle said.

“ Michael Dell doesn’t like to be at a disadvantage and is likely already working to close this gap,” Enderle said. “I think the purchase of a firm or firms that could help him do that will come reasonably quickly.”

Dell announced its Perot acquisition in September, 2009, for $3.9 billion when Dell had $11.7 billion in cash in the quarter prior to the deal’s announcement. In February Dell announced plans to acquire systems management appliance vendor Kace for an undisclosed sum.

Dell currently has about $11 billion in cash for future acquisitions, and at least one Dell executive told the press this month that the company was on the hunt to buy other companies.

Indeed, last summer, Dell hired away a top IBM acquisitions expert, David Johnson, after he’d spent 27 years with Big Blue. And the new hire comes just at the right time. A Wall Street Journal article last year noted that “analysts and investors are calling for Dell to buy other companies to broaden its business.”

“ Dell simply doesn’t have the size, doesn’t have the breadth of relationships, and doesn’t have the capability” to compete with IBM, HP and others, financial analyst Toni Sacconaghi of Sanford Bernstein told the Wall Street Journal last year.

Dell’s Shopping Spree. Is Networking Next?

Jessica Davis

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