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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Tuesday, November 6, 2007 Continuing move beyond core business, Dell to buy software firm for $1.4 billion Associated Press DALLAS -- Personal computer maker Dell said Monday it has agreed to pay $1.4 billion in cash for EqualLogic Inc., which makes data-storage network systems, in another move to boost growth by looking outside its traditional PC business. Data storage accounted for only 4 percent of Dell's revenue last year but is growing much faster than PC sales. In the first nine months of this year, EqualLogic had sales of $91 million and lost $1.9 million, although it turned a profit in the July-September quarter, according to regulatory filings. Round Rock-based Dell Inc. said the deal is expected to close early next year and would reduce earnings by 2 to 5 cents per share for fiscal 2009 and 2010. The figure excludes the amortization of intangibles. Chief Executive Michael Dell said acquiring EqualLogic bolstered his company's lineup in the fastest-growing part of the storage industry. Dell, who returned in January as CEO, said it was the company's sixth acquisition in two years. EqualLogic's systems use proprietary software designed to simplify how businesses store and manage data. The company says its target customers are medium-size businesses that can't afford costlier storage area network systems. Research firm IDC estimates spending on virtualization software and services will exceed $15 billion worldwide by 2011, up from $6.5 billion last year. Virtualization is intended to let companies manage large amounts of data with less hardware. Dell acknowledged it could affect demand for his company's hardware. "While you might find any given particular customer who has more revenue or less revenue because of virtualization, we know these technologies are available and so we embrace them," he said in an interview. EqualLogic CEO Donald Bulens said virtualization would help hardware makers by creating new demand for storage products. Analysts said the deal means Dell will develop more of its own storage products, putting it in competition with data-storage gear maker EMC Corp., which counts Dell among its largest customers. JP Morgan analyst Bill Shope said Dell would still rely on EMC for traditional storage customers while using EqualLogic to sell to midsize businesses. Dell shares fell 8 cents to $29.97 Monday, and EMC shares dropped $1.06, or 4.3 percent, to $23.49. The deal was announced as EqualLogic prepared for an initial public offering.

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