Dell to buy data storage company
Personal computer maker Dell said Monday it has agreed to pay $1.4 billion in cash for EqualLogic Inc., which makes data-storage network systems, in another move to boost growth by looking outside its traditional PC business.
Data storage accounted for only 4% of Dell’s revenue last year but is growing much faster than personal computer sales.
In the first nine months of this year, EqualLogic had sales of $91 million and lost $1.9 million, though it turned a profit in the July-September quarter, according to regulatory filings.
Round Rock, Texas-based Dell Inc. said the deal was expected to close early next year and would reduce earnings by 2 to 5 cents a share for fiscal 2009 and 2010.
Chief Executive Michael Dell said acquiring EqualLogic bolstered his company’s lineup in the fastest-growing part of the storage industry. Dell, who returned in January as CEO, said it was the company’s sixth acquisition in two years.
EqualLogic systems use proprietary software designed to simplify how businesses store and manage data. The company says its target customers are medium-size businesses that can’t afford costlier storage area network systems.
Research firm IDC estimates that spending on virtualization software and services will exceed $15 billion worldwide by 2011, up from $6.5 billion last year.
Virtualization is intended to let companies manage large amounts of data with less hardware. Dell acknowledged that it could affect demand for his company’s hardware.
Dell shares fell 8 cents to $29.97 on Monday.
The deal was announced as EqualLogic prepared for an initial public offering. It filed for an IPO in August. No date has been set for the stock sale.
Software virtualization company VMware Inc. went public in August in the largest tech IPO since Google’s three years earlier.
EqualLogic got seed funding from Charles River Ventures, and eventually received more than $50 million in backing from that and other venture firms.
Christopher Baldwin, a Charles River partner and EqualLogic board member, said Monday’s deal was the largest all-cash acquisition of a venture-backed start-up. Most purchases include at least some stock as currency.
EqualLogic, based in Nashua, N.H., has more than 3,200 customers in 30 countries.
