Stung by the 3Par bidding war, Dell moves to raise cash

Dell on Tuesday said it will float bonds as it raises money potentially for new acquisitions. Hewlett-Packard's stronger balance sheet enabled it to trump Dell and win storage vendor 3Par.

Stung by that experience, Dell is looking to bolster its cash reserves in the event of another bidding war. HP won 3Par with a $2.4 billion bid. Dell originally offered $1.15 billion and then the bidding war with HP commenced.

In a filing with the Securities and Exchange Commission, Dell said it will offer bonds in three parts. Dell's prospectus didn't detail an exact amount to be raised, but analysts say the amount is about $1.5 billion. One analyst cited a Bloomberg report on the $1.5 billion figure. Other tech giants such as Cisco, IBM, Microsoft and Oracle have floated bonds in part to fund acquisitions.

Dell said in a prospectus that it has $3.3 billion in debt. Dell expects to use the proceeds from the bond offering for general corporate purposes, which includes acquisitions. Dell added in its filing:

As part of our overall growth strategy, we have completed strategic acquisitions to augment select areas of our business with more products, services, and technology. Our recent acquisition of Kace Networks, Inc, Scalent Systems Inc., and Ocarina Networks Inc., and our continued integration of Perot Systems Corporation, have enabled us to expand our services business and better position our company for immediate and long-term growth through the sale of additional enterprise solutions.

ISI analyst Abhey Lamba said in a research note:

We believe the company did not need the offering to pay down its current obligations and it will likely use the proceeds to be more aggressive in M&A. Last week, Dell withdrew from the bidding for 3PAR after several weeks of competing with HP for the storage company. Prior to 3PAR, Dell purchased Scalent Systems on July 1st and Ocarina Networks on July 20th. We continue to believe acquisitions are key to Dell's future growth prospects.

Dell had about $7.8 billion in net cash.

Related:

• Dell aims to diversify away from PCs, but how?
• Dell to acquire Ocarina Networks to boost data management offerings (data management)
• Dell’s acquisition of KACE: A smart move (systems management appliances)
• Dell: Perot Systems purchase an ‘anchor’ acquisition; More deals likely (services)
• Dell gets more channel religion; Buys EqualLogic for $1.4B (storage)