Update: Dell to buy Quest for $2.4 billion

Deal would boost Dell's software position versus rivals IBM, HP, BMC and CA

Dell announced Monday that it is buying Quest Software for $2.4 billion, following weeks of speculation over its interest in the infrastructure software vendor. The deal is expected to close later this year.

Quest's products include the Toad database management toolset, Quest One Identity management software, and the SonicWALL and Secureworks products, all of which will be complementary to Dell's portfolio, the companies said in a statement.

It's the latest acquisition by Dell since its formation earlier this year of a new software division, headed by former CA Technologies CEO John Swainson. In March, Quest announced it was going private through a $2 billion stock buyback along with private equity firm Insight Venture Partners, but also said it was open to better offers.

"Quest's suite of industry-leading software products, highly talented team members and unique intellectual property will position us well in the largest and fastest growing areas of the software industry," Swainson said in a statement.

"This agreement is great news for our customers and partners worldwide," Quest CEO Vinny Smith said in a letter to customers. "Dell's distribution, reach and brand are well recognized in the industry. Dell is acquiring Quest as the foundation to their software business."

In doing so, Dell will bring itself into closer competition with the "Big Four" systems management vendors, IBM, Hewlett-Packard, BMC and CA.

Quest had $857 million in revenue during its fiscal 2011, and its addition will provide Dell with "the foundation of a $1.2 billion software business," according to a statement.

"We've been making good progress bringing to market Dell software IP, and the acquisition of Quest accelerates that process," Swainson said during a conference call on Monday.

Going forward, Dell plans to pair up its software with its servers and services business to provide "unique, value-added differentiation," Swainson added. "We're not looking randomly at software profit pools."

Dell's strategy will keep three broad industry trends in mind, namely "exponential data growth," the rise in cloud-based software, and mobile device proliferation, he said. All of these present risks to businesses, and Dell will offer companies ways to manage them, according to Swainson.

Initially, Dell will sell Quest's products as suites, but will look for ways to integrate its offerings over time, according to executives. The Quest family of software, which also includes Windows server management tools, are a natural fit alongside other recent Dell acquisitions, such as application modernization vendor Clerity, Swainson said.

A number of Quest's products are offered as SaaS (software as a service). Dell will look at adding more SaaS deployment options, according to Swainson.

Dell will also keep an eye on the applications market, with a focus on small to medium-sized businesses, he said. It wasn't clear whether Swainson was referring to acquisitions, or an extension of the company's existing Cloud Business Applications service, through which it resells products such as Salesforce.com.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

Copyright © 2012 IDG Communications, Inc.

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