) recently closed the acquisition of Quest Software for $2.4
billion or $28 a share. The process of buying this company was
initiated in July 2012, when Dell edged out its competitors and
other bidders to acquire the information technology (IT) management
The purpose of the purchase was to increase Dell's product
offerings, which may go beyond personal computers. Increasing usage
of smartphones and tablets has dented the PC business. Thus, new
offerings may act as a growth catalyst.
This is the second biggest acquisition since the company
acquired Perot in 2009. This new acquisition might help Dell to
strengthen its position in the server, networking and storage
Moreover, The Quest One Identity and Access Management solution
family will also strengthen Dell's strong set of security assets
such as SonicWALL and Secureworks, thereby helping it to serve
different customer requirements.
The acquisition marks Dell's fourth deal this year and also
furthers the company's objective of moving to the higher-margin
markets, such as software, storage and services. The initiative
would help the company to shift its focus from the traditional PC
business, which is putting pressure on its fundamentals.
The shift is critical for Dell's success in the dynamic and
evolving technology sector, where most of the growth in the next
few years is likely to be in the storage, software and
virtualization segments. Since Dell's business has been focused on
PCs, the company has had to refocus the business and even go in for
some cost reduction over the next three years.
The ongoing uncertainty in the PC market has led
) and Dell to shift their focus toward the high-margin enterprise
However, it is not ignoring the PC segment either. The company
recently announced a range of PCs built on the Ultrabook model.
Concurrent with the three new PCs, Dell introduced the PowerEdge
C8000 series of servers to support high-performance computing and
big data applications. The servers will facilitate space saving,
reduce costs by saving energy and improve data center performance
at a high temperature.
Despite Dell's upcoming product momentum, we recommend avoiding
the shares because of overall PC market health, declining
fundamentals and a high debt burden.
Currently, Dell has a Zacks #5 Rank, implying a short-term
Strong Sell rating.
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