Dell eyeing Quest purchase? It makes sense

Summary:Quest Software could give Dell the software boost it needs to diversify away from PCs.

Dell is reportedly in discussions to buy Quest Software.

The talks, reported by Bloomberg, aren't all that surprising. Analysts have pegged Quest as a Dell acquisition because it fits in with the PC maker's software strategy.

Quest's software manages databases and backs up data. Dell has been focused on building out its software business to offset its reliance on commodity PCs. Quest's portfolio revolves around development and management tools on Windows and VMware.

Also: Dell struggles as corporate post PC era looms: Is Windows 8 the savior? | Dell: Q1, outlook weak; Cites 'challenging environment'

As Dell's disappointing earnings this week show, the company needs to step up its software diversification effort. To do truly beef up software, Dell needs an acquisition that's more than the tuck-in variety.

In a recent research note, Jefferies analyst Peter Misek made the case for Quest. Misek argued that Quest Software would be a logical purchase to round out Dell’s cloud strategy. He said:

Despite Dell's recent flurry of deals, we think an acquisition of Quest makes a lot of sense. We estimate it could be about 5% accretive to Dell's EPS. Also, Quest's development and management tools would fit well with Dell's cloud/software strategy.

The catch is that Quest would probably go for at least $2 billion, which is above Dell's usual target. On the other side of the equation, Quest could add about $1 billion in revenue a year to Dell, said Misek.

Topics: Dell

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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