AppAssure in Dell Storage - Analyst Blog

By Zacks Equity Research,

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Dell Inc. ( DELL ) reportedly acquired backup and recovery software maker AppAssure Software for an undisclosed amount, last Friday. The acquisition reflects the world's third largest PC maker's shift toward the higher margin segments, such as software, storage and services.

Six-year old Virginia-based AppAssure is in the business of developing backup and recovery software for all storage infrastructures (virtual, physical and cloud). The company's solutions specialize in protecting data center applications through prompt and accurate recovery in case of a power outage, human error or other unavoidable circumstances.

AppAssure's offerings will go hand-in-hand with Dell's cloud storage offerings. Dell's storage offerings drive efficiency and reduce costs by streamlining operations. From now on, the company will be able to deliver an integrated solution clubbing data center application software as well as an application backup and recovery software.

Dell has been working hard to expand its storage portfolio for the past few years. Dell entered the storage market in 2008 with its purchase of EqualLogic. However, the company was out of luck with its much-hyped bid for 3PAR Inc., losing out to archrival Hewlett-Packard Co. ( HPQ ) in August 2010. 3PAR provides highly virtualized storage solutions with advanced data management features such as dynamic tiering and thin provisioning for cloud computing environments.

But Dell made up for the loss with the acquisition of Compellent Technologies Inc. in February 2011. Compellent is the global provider of enterprise data storage systems, which facilitate the automation of data movement and management at the block or granular level.

We are unclear about the extent to which the acquisition will be financially accretive to Dell. But we believe that the continuous enhancements in the storage vertical would lead to a much higher percentage of total revenue, going forward. Dell currently generates 3.0% of total revenue from its storage business.

Apart from storage, Dell has also expanded its networking capabilities with the acquisition of Force 10 Networks in July 2011. Overall, we notice that the tech giant is becoming a more comprehensive provider to the enterprise segment. We believe this approach is exactly what Dell needs to compete against the likes of Cisco Systems Inc. ( CSCO ) and Hewlett-Packard Co.

Though we understand that soft demand in the Consumer segment, a high debt level and stiff competition from technology majors will continue to remain concerns, we feel that Dell will successfully capitalize on increasing IT expenditures and show top-line improvement.

Currently, Dell has a short-term Buy recommendation, as indicated by the Zacks #2 Rank.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CSCO , DELL , HPQ

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