Report: Dell May Buy Quest Software

Dell reportedly is considering buying Quest Software, whose offerings are designed to help businesses in areas including database, server and user workspace management, data protection and backup, performance monitoring, and identity and access management.

According to a 25 May Bloomberg Businessweek article citing “people with knowledge of the matter”, Dell is one of several companies that have offered to buy Quest in the two months since its executives agreed to be acquired by venture capital firm Insight Venture Partners for $2 billion (£1.27bn).

Becoming a solutions provider

An acquisition of Quest would be the latest step by Dell in its efforts to reduce its reliance on PC and server hardware and become more of an enterprise solutions provider that also offers storage, networking and software, which increasingly is becoming a larger focus for the world’s third-largest PC maker.

Dell has been aggressive over the past couple of years in building out its capabilities via acquisitions, and already this year has announced five new purchases. Among those acquisitions were Wyse Technology – a longtime hardware maker that itself was shifting its focus to cloud software and desktop virtualisation – Make Technologies for application modernisation software, and Clerity Solutions, also in application modernisation.

Several analysts had pegged Dell – as well as Microsoft, Oracle, CA and BMC Software – as a logical company to pursue Quest, given the tech giant’s interest in expanding its software capabilities. Quest executives reportedly said this month that since accepting the $2 billion bid from Insight Venture Partners, the company during a so-called “go shop” period had received a number of acquisition proposals.

Since chief executive Michael Dell began the transformation at his namesake company a few years ago, analysts have generally lauded the company’s strategy, though the going has not always been smooth. Most recently, Dell executives on 22 May reported that during the first three months of the year, revenues fell 4 percent from the same period in 2011, to $14.4 billion, while profits tumbled 33 percent, to $635 million.

Missing expectations

The numbers missed Wall Street analyst expectations, and the company’s stock has taken a beating since.

During a conference call with analysts and journalists to discuss the quarterly financial numbers, Brian Gladden, Dell’s senior vice president and chief financial officer, said the company remained committed to the strategy despite the challenges, saying that the results of the transformation would “not be linear. … This is a long-term strategy and will take time. … We’re trying to move as quickly as possible in this transformation.”

Krista Macomber, an analyst with Technology Business Research, said in a 22 May research note that the quarterly numbers won’t derail Dell’s strategy.

“The enterprise revenue decline is not yet a significant threat to Dell’s strategic direction,” Macomber wrote. “Considering Dell’s expansive existing install base and go-to-market know-how within the midmarket, Dell’s midmarket customers are adopting its solutions and services ahead of enterprise sector customers. Adoption trends are evidenced by Dell’s reported SMB [small and midsize business] revenue growth of 4% year-to-year in 1Q12, with solutions and services revenue increasing 17% over the same time frame.”

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