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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