The Round Rock, Texas-based software arm of computer giant Dell Inc. is being acquired by New York City-based hedge fund Elliott Management Corp. and San Francisco-based private equity firm Francisco Partners, the companies announced on June 20.
Financial terms of the purchase, which is subject to regulatory review, were not disclosed.
In a statement, Dell’s senior vice president and CTO Tom Sweet said the deal would enable Dell Software’s employees “to continue delivering innovation,” while Dell Software president John Swainson said his company would continue to focus on collaborating with customers across the globe as part of the Francisco Partners and Elliott Management portfolio.
Known best for its network security solutions, Dell Software’s portfolio also spans analytics, database management, data protection, endpoint systems management, identity and access management, Microsoft platform management, and performance monitoring.
Its acquisition hardly came as a surprise to analysts, with International Data Corporation (IDC)’s Tim Grieser noting that Dell had sold its consulting division to Japan-based NTT Data Corp. in March and been “shopping around” its software assets in order to raise money for its pending $67 billion USD acquisition of cloud software firm EMC Corp.
Eric Hanselman, chief analyst at 451 Research, said the deal would be especially welcome news for Dell’s software division: having secured funding from a private equity firm, the new company will have a chance to use its Quest Software and SonicWALL products and their considerable base of more than 180,000 customers as a launching pad for further growth.
“It’s important to make sure that the remaining entity has the ability to really capitalize on its core strengths,” Hanselman said. “And I think it’s a reasonable question to ask whether or not Dell has effectively managed the software assets of their business up to now.”
Dell’s technology division should benefit too, by narrowing its focus on hardware so that it will be in a better position to integrate with EMC, he said.
“In order to be successful as a new entity, Dell needs to have a much more fundamental focus on what its business is going to try and achieve,” Hanselman said. “And there is a risk in trying to integrate too many moving parts in a business.”
Announced last year, Dell’s purchase of EMC is presently the largest acquisition in the IT industry, though with the deal not closed yet, EMC has continued operating under its own name. EMC shareholders are expected to vote on the acquisition this summer, and Dell has said it expects the deal to close by the end of October.
As for the entities buying Dell Software, Francisco Partners focuses exclusively on acquisitions and investments in the technology sector. Its transaction values have ranged from $50 million USD to over $2 billion USD, according to the firm, and to date it has raised approximately $10 billion USD in capital and invested in more than 150 technology companies since being founded in 1999.
Elliott Management, meanwhile, supported the deal through its recently established Menlo Park affiliate, Evergreen Coast Capital.
Dell, Francisco Partners, and Elliott Management representatives all declined to be interviewed regarding the acquisition.