Dell may sell off $10 billion worth of assets, including Quest Software, AppAssure, SonicWall and Perot Systems, according Reuters. The potential moves would occur before Dell finalizes its $67 billion buyout of EMC.
UPDATED December 2, 2015, 8:30 p.m. ET: Three private equity firms bidding to buy Dell's SonicWall and Quest Software businesses; Perot in play.
Original Nov. 3 Report Continues Here
Dell has spent the past decade trying to diversify beyond server and PC hardware, making moves into software, storage, networking, security and more. Among the company's acquisitions:
AppAssure: A specialist in storage, backup and replication technology. Dell acquired AppAssure and its 230 employees for an undisclosed sum in February 2012.
Perot Systems: Dell and Hewlett-Packard strongly envied IBM's IT services strategy from the 1990s. That led to HP buying EDS for $13.9 billion in 2008, and Dell buying Perot Systems for $3.9 billion in 2009. Ironically, people-centric enterprise IT outsourcing slowed down as the cloud wave grew larger and larger.
Quest Software: Heavy into IT management software. Dell acquired Quest in July 2012 for $2.36 billion, but angered some channel partners by shutting down the business's PacketTrap platforms for managed services providers (MSPs).
SonicWall: Focused on network security, firewalls, backup and recovery, and more. Dell acquired SonicWall in May 2012 for an estimated $1 billion to $1.5 billion (source: Bloomberg). The company had about 950 employees and a 12 month revenue stream of $260 million at the time of the deal.
Why Sell?
First, Dell needs to strengthen its balance sheet ahead of the $67 billion EMC buyout. Yes, Silver Lake Partners -- Dell's private equity firm -- has approved the EMC buyout. But sort of like selling off an extra car before you buy a house, one or more asset sales involving AppAssure, Perot Systems, Quest Software or SonicWall could give Dell more financial flexibility in the months and years ahead.
Second, Dell could be worried about product overlap. AppAssure, for instance, could have some overlap with EMC's storage and data protection businesses. Also, Quest Software could have some virtualization and IT management overlap with VMware's business (part of the EMC buyout).
Channel Impact
Generally speaking, Dell's PartnerDirect channel strategy has gained more and more respect since it launched in December 2007. I still hear occasional complaints about channel conflict from Dell's partners. But overall, I believe Dell has been far more consistent with partners than top rival Hewlett-Packard over the past decade (though Hewlett-Packard Enterprise CEO Meg Whitman gradually restored channel partner trust since arriving at HP in 2011).
Mergers, acquisitions and asset sales in the vendor community can certainly trigger partner stress. And stress levels will certainly rise as partners seek to navigate how they work with Dell, EMC and VMware once Dell owns EMC. Still, M&A and company breakups tend to be the norm these days. In addition to navigating Dell-EMC, the channel is moving forward as HP finally breaks into two companies; and IBM adjusts to life without x86 servers (now owned by Lenovo).
Still, there's no guarantee Dell will sell off AppAssure, Perot Systems, Quest Software or SonicWall. Dell declined to comment to Reuters about the potential asset sale report.
