Dell acquires Quest: $2.4 billion to be a software player

Dell acquires Quest: $2.4 billion to be a software player

Summary: Dell wins a bidding war for Quest and now builds out its software unit with an eye on everything from identity management to data center tools to database administration.

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In a push to become a software player, Dell won a bidding war for Quest Software as it aims to bolster its data center software. The final price tag: $28 a share, or $2.4 billion.

Dell had been rumored as a buyer for Quest software for months. Quest received a $23 a share bid from Insight Venture Management and Vector Capital in March and then a "strategic buyer" pushed the price up to $27.50. Dell ultimately sealed the deal for $28 a share.

With the Quest purchase, Dell said its software business will have about $1.2 billion in annual revenue. 

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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.



In other words, Dell builds out its relatively new software unit with a host of software for use in the data center.

On a conference call with analysts, Dell software chief John Swainson said:

Our software strategy is focused on addressing these customer needs with three key tenets The first aspect of which is to leverage and build upon our existing software portfolio. After going through the process of assessing Dell's software assets after I joined the business, it was clear to me that we had a good base of software IP from which to build, both standalone and embedded within our hardware solutions. Second, we are in the fortunate position of not having a large legacy hardware or software base. So we can look forward to emerging technologies that will potentially cannibalize some of those opportunities, rather than look backwards at supporting legacy that might constrain our thinking or offerings. Our solutions will focus on the current problems with a particular focus on simplification and automation in solving our customers' needs. Finally, we will be focused on key areas of software where we think there's good long-term potential that will integrate well with Dell's existing hardware and services businesses. Quest brings us an unbelievable portfolio of software assets that we're going to use as the foundation of our software solutions business.

According to Dell, Quest will add to the company’s enterprise services. Among the key items:

  • Quest brings identity management software that can complement Dell's SonicWall and Secureworks units.
  • Quest's performance monitoring tools will work with Dell's data center automation push.
  • Windows server software from Quest will complement Dell's Clerity and Make Technologies purchases.

For fiscal 2011, Quest had $857 million in revenue. Quest also has 1,500 sales people and 1,300 developers.

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Related:

Quest's price tag keeps going higher

Dell eyeing Quest purchase? It makes sense

 

Topic: Enterprise Software

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12 comments
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  • Dell is smart

    Moving very aggressively towards the enterprise and out of the WinTel market where the margins are super thin.

    I bet they won't ship a Windows RT device either, just like HP recently stated.
    JeveSobs
    • Dell and HP are shipping tablets

      They are not shipping the WinRT tablet which is based on the ARM processor. They are shiping the Win Pro Tablets which are based on the Intel System On A Chip (SoC). Dell and HP are strategic partners with Intel.
      frankwick
    • most companies

      I believe will not ship a Win RT tablet, it will most likely be a disaster. Windows 8 overall is going to be a disaster, and there wont be really any margins on those tablets anyway, with all the licensing fees.
      Jimster480
      • Dunno, it could go either way

        It'll either be a decent success like the xbox, or an EPIC FAIL like the Win7 phone.

        Still too early to tell, although I think MS branding their own tablets was a step in the right direction.
        CaviarBlack
    • Dell is stupid

      Moving very aggressively twoards software when more and more devices are being being sold based on hardware.

      Where are all the ZDNET writers with articles about how Dell is risking upsetting Microsoft by venturing into their traditional businesses?

      Dell hasn't designed a new piece of hardware in ten years. All they care about is software offerings. Guess what Dell? No one wants your awful backup or cloud services. Why should they when they can get better products from Google, Microsoft, Amazon and Apple.

      It's really bad when you're a hardware company and you don't even know how to design decent hardware. Why should Dell make a Windows RT Tablet? They haven't made a decent tablet for the last 10 years. Why start now. We'll just move our users to Samsung Series 9's a nd other companies who are willing to produce modern hardware. In five years Dell will be the next Compaq. Sell your stock now.
      dbiz2
  • good buy

    This is a good buy for Dell. Quest is arguably the best SQL (SQLServer and Oracle) front-end avaiable, even if I think they are a bit overpriced. Additionally, their hooks into server management will help Dell develop into a software services company quickly.
    brentgee
    • I would argue they are not...

      - SSMS is a great tool, friendly UI, nicely integrates with SSIS, and is free.
      - SQL Developer for Oracle used to suck real hard, but they have pumped a lot of development into the product over the past few years and now it's finally good..and also free.

      I know Quest makes some other database tools, but they aren't really known for anything outside of TOAD. I guess if they continue to stay profitable though, more power to Dell. With ~40% of their employees working sales I guess they would be.

      If WinRT is aggresively priced (like $200) and the app ecosystem turns out to be really nice, why not spend a tad more to get a tablet that looks much nicer than a Kindle Fire? Also, I really don't understand why they don't include more business features for RT, they could sell like hotcakes for business.

      The game changer for RT tablets could be if MS can push the game studios to get decent games on these. Hookup a controller or use your smart phone as a virtual controller, put up the kick stand, would be fun. I don't expect top notch graphics but porting from Intel to ARM is easy and all games are already made for Windows. A PS Vita is what like $249 anyways?
      dtdono0
  • following the lead

    Most companies are trying to become software players now, as there is less money in hardware and more money in software. I see most hardware going to small vendors like with the chinese tablets, where they can make more profit on hardware with low overheads, and most current hardware players becoming more software based.
    Jimster480
  • Looks like a dog to me

    # in the sales org > than # in R&D = vapor, hot air, and hype
    cornpie
    • Sales People < R&D People

      Maybe you need fewer R&D folks to sales folks because the R&D folks are delivery such value that there are not enough Sales folks to get it out to all of the customers that want it? :)
      Your Non Advocate
    • Perfect Fit for Dell

      They do little to no R&D and have a lot of salespeople. They have no innovation and are a me-too shop so maybe it's a good fit after all.

      People think Dell's computers suck (see customer satisfaction ratings) do you really think they will want to buy software from a company that makes junk computers and now is trying to do software?

      At least when IBM did it, they had/have a good cache of software that is well regarded. Dell has nothing as they design and develop nothing.
      itguy10
  • Financials

    Paying 12.3x trailing cash flow, 26.3x operating income and 55.2x net earnings smacks of desperation or lunacy. On January 3, 2012 QSFT had a market cap of $1.57B vs todays $2.4B price tag. DELL shareholders have likely been hosed. No way there is that much value in the merger.
    txscott