ROUND ROCK, Tex. (TheStreet) -- Dell's (DELL) $876 million attempt to acquire Compellent (CML) may have sent the storage maker's shares into a tailspin, but could ultimately prove to be crucial to Dell's long-term enterprise strategy.
The two companies announced on Thursday that they are in advanced discussions about a possible merger, with Dell looking to pay $27.50 a share for the Eden Prairie, Minn.-based outfit.
Compellent's stock, however, plunged $4.61, or 13.70%, to $29.94 on Thursday. Dell shares rose a penny, or 0.08%, to reach $13.69, as the Nasdaq gained 0.03%.
The move is a positive for Dell. "I feel like it's been a long time coming -- it is a good deal," said Vanessa Alvarez, an analyst at Forrester, in an email to TheStreet. "Compellent, from a technology perspective, has what it takes to move Dell forward in the storage market."A combination of servers, networking and storage is the tech sector's must-have trifecta, and chatter about about a Dell buy of Compellent has swirled in the months since Dell lost out to HP (HPQ) in the battle to acquire 3Par (PAR). Compellent, which competes with HP and EMC (EMC), touts tiered storage products that shift older data onto less expensive storage media. Forrester's Alvarez predicts that this technology will help Dell compete more effectively in large enterprises. "The biggest challenge enterprises face today is the large amounts of unstructured data they are sitting on, and in order to effectively manage it, technologies such as those from Compellent (and 3PAR) are needed," she said. Compellent recently posted strong third-quarter results and has successfully tapped into growing demand for virtualization. Dell has made other plays in storage M&A, spending $1.4 billion to acquire EqualLogic in 2008 and snapping up Exanet for an undisclosed fee earlier this year. Alvarez, however, thinks that we're unlikely to see a repeat of the tug-of-war which saw HP walk off with 3Par. "There will be no bidding war, because although I've said and continue to say [that] Cisco (CSCO) needs storage, they are not there yet," she explained. --Written by James Rogers in New York. >To follow the writer on Twitter, go to http://twitter.com/jamesjrogers. >To submit a news tip, send an email to: firstname.lastname@example.org
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV