Dell traded down 1% to close at $12.39. Quest edged up by a fraction to close at $27.82. The Round Rock, Texas-based company said it agreed to acquire Quest for $28 a share, or roughly $2.4 billion.
Quest, based in Aliso Viejo, Calif., last week said it’s received a buyout proposal valued at $27.50 a share, which was widely believed to be from Dell.
A group led by Insight Venture Partners had bid to buy Quest for $23 a share in March, later raising the offer to $25.75 a share.
In a statement, John Swainson, president of Dell’s software group, said the acquisition “will enable Dell to deliver more competitive server, storage, networking and end-user computing solutions and services to customers.”
Dell is pushing to transform itself from a powerhouse in personal computers into a bigger player in the more lucrative market for corporate information technology.
“After a bidding war with Insight Venture Partners for Quest, Dell appears victorious,” Topeka Capital Markets analyst Brian White said in a note.
White said the deal “significantly expands Dell’s footprint in the software market and adds a richer-margin piece of business to the company’s portfolio.”
“The most important investment theme around the Dell story is the company’s continued migration to higher-margin ,enterprise products and services that are focused on serving the next-generation data centers that are paving a path into the cloud,” he added.
Dell has tried to expand into the cloud computing market by acquiring other major players in the data center and IT services market, including Perot Systems and Force 10 Networks.
Topeka has a buy rating on Dell, with a price target of $15.75.
On the other hand, Mizuho Securities analyst Abhey Lamba reiterated a neutral rating on Dell with a $15 price target, citing the company’s challenges — particularly its PC market exposure.
“We remain on the sidelines … as we believe the environment is getting increasingly difficult in its core business and its overall profitability will continue to be impacted by the broader market conditions,” Lamba wrote. “Dell will have a hard time growing earnings on an organic basis if it continues to lose market share in the PC segment.”
Dell’s shares, down 15% in the year-to-date, have declined roughly 27% over the past 12 months.
- Dell’s shares, down 15% in the year-to-date, have declined roughly 27% over the past 12 months.
- Dell is pushing to transform itself from a powerhouse in personal computers into a bigger player in cloud computing.