7, 1999, Dell Computer Corporation announced its intent to acquire storage networking
manufacturer ConvergeNet, in a stock swap valued at approximately $340 million.
This is Dell's first company acquisition of any kind, and is designed to help
Dell improve and expand its PowerVault line of storage equipment.
Dell has stated
it wants to be one of the top three storage vendors in the world, and we believe
this acquisition will help it achieve its goal. EMC's purchase last month of
Data General (Dell's current supplier for PowerVault storage) complicated Dell's
storage supply chain; this acquisition puts Dell in control of its own storage
destiny. In addition, ConvergeNet's ability to connect storage products and
storage systems to multiple server OSes (UNIX, Solaris, Windows NT, Windows
2000, NetWare, Linux) immediately expands Dell's capabilities in that area,
and thus their market opportunity.
The added benefit
to Dell is that it now gains credibility as a complete systems vendor. Dell
has historically been viewed as a PC and PC Server manufacturer; that categorization
places inherent limits on Dell's growth. To get beyond a certain level, it will
need to deliver more than Intel-based PCs, servers, and notebooks. (We are not
ignoring their PowerVault storage systems, but those are really only peripherals
to be attached to the Intel servers - not a separate market in the manner of
The other impact
is non-technological: Dell has grown to $21.7 billion in sales solely through
internally-generated growth, rather than acquisition. Although buying one company
does not in itself constitute a strategic change in Dell's growth plans, it
will cause a re-evaluation by the computing world (analysts, competitors, and
potential buyout candidates) of how to view all of Dell's actions in the future.
means a customer can now more readily consider Dell when making decisions for
a heterogeneous system environment (Windows/Unix/etc.). In addition, customers
have a wider selection of storage capabilities when considering Dell. This is
a positive for existing and potential customers. Since the acquisition and benefits
from it will not take place until the end of 1999, customers in the middle of
a buy should not alter their plans. However, acquisitions planned for early
2000 should consider reviewing this new product offering during their acquisition
as with existing Dell offerings, should be considered for Intel-based server
computing environments, and now also for heterogeneous environments.