Dell Captures SonicWall - Analyst Blog

By
A A A

Dell Inc. ( DELL ) has moved a step forward to boost its enterprise technology portfolio, with the takeover of network security and data protection software vendor SonicWall, for an undisclosed sum. The acquisition reflects the world's third largest PC maker's increasing focus on the higher-margin segments, such as software, storage and services.

San Jose, California-based SonicWall is a key player in the advanced network security and data protection market. The company provides next-generation firewall technology and unified threat management (UTM) software. SonicWall has a diverse product line that largely targets small and medium businesses (SMBs).

However, the company is now turning its attention to large enterprises with a new firewall offering. SonicWall competes primarily with networking giants Cisco Systems Inc. ( CSCO ), Juniper Networks Inc. ( JNPR ) and Fortinet Inc. ( FTNT ).

SonicWall's assets will help Dell to deliver extensive security product suites. Dell's exposure to the SMB sector will be much stronger. Last quarter, Dell's SMB segment reported 6.0% year-over-year growth, which was much better than the performances by other segments. We believe that with SonicWall, Dell's SMB revenue could witness a boost going forward.

Post completion (some time in the second half of 2012), the acquisition is expected to be accretive to earnings. Moreover, Dell would be able to compete in the UTM market, which, according to the tech research firm IDC, could grow at a CAGR of 13.0% through 2015.

Dell has been eyeing the security space for long. The company acquired KACE in February 2010. KACE was a provider of systems management appliances and supported Dell in delivering end-point security. Information-security services firm SecureWorks Inc. was acquired in August 2011 for its excellence in managed security services, security and risk consulting, and threat intelligence.

The need for highly scalable and flexible network and information technology security across different industrial sectors has actually prompted consolidation in this area. We have seen a couple of acquisitions in 2011. Of these, Intel Corp. 's ( INTC ) acquisition of McAfee Inc. and Hewlett-Packard Co. 's ( HPQ ) acquisition of ArcSight Inc. are worth mentioning.

With inputs from SonicWall, SecurityWorks and KACE, Dell will be able to expand its Security-as-a-Service offering and enable customers to easily access reliable, capable and innovative information security to fight frequent and severe cyber attacks.

We see that Dell has also been very active in expanding its storage and networking business through successive acquisitions. However, we are concerned about soft demand in the Consumer segment, a high debt level and stiff competition from technology majors. But we believe that increased IT spending could help fundamentals.

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


 
CISCO SYSTEMS ( CSCO ): Free Stock Analysis Report
 
DELL INC ( DELL ): Free Stock Analysis Report
 
FORTINET INC ( FTNT ): Free Stock Analysis Report
 
HEWLETT PACKARD ( HPQ ): Free Stock Analysis Report
 
INTEL CORP ( INTC ): Free Stock Analysis Report
 
JUNIPER NETWRKS (JNPR): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research



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



This article appears in: Investing , Business , Stocks

Referenced Stocks: CSCO , DELL , FTNT , HPQ , INTC

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

61,354,178
  • $10.59 ▲ 13.26%
57,732,182
  • $16.27 ▲ 1.12%
51,991,548
  • $103.30 ▲ 0.78%
48,129,834
  • $20.65 ▲ 5.52%
41,623,916
  • $12.63 ▲ 8.13%
34,295,241
  • $76.68 ▲ 2.49%
31,519,079
  • $34.57 ▼ 1.00%
28,847,879
  • $3.64 ▲ 0.28%
As of 9/2/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com