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Dell buys SonicWALL

In a deal reputedly worth between $1 billion and $1.5 billion, Dell has announced a definitive agreement to buy SonicWALL from venture capitalist firm Thoma Bravo (Thoma Bravo bought SonicWALL for $717 million in 2010). Dell declined to name the actual price, but said it would be funded by cash. Both analysts and the market consider it a positive move. SonicWALL had revenue of $260 million last year, and Dell’s market price moved up by 18 cents to $17.14 in morning trade following the announcement.

Both Dell and SonicWALL see the acquisition as an enabler to expand business from their current mid-market sphere into large corporate customers. The precise list of top PC manufacturers depends on whether tablets are defined as PCs – if they are, Apple would be the leading manufacturer. However, it is HP that dominates the enterprise market that Dell is seeking. “Our customers see security as a key IT concern for the foreseeable future,” commented John Swainson, president of the Dell Software Group. “This transaction aligns well with Dell’s mid-market design focus and allows us to accelerate growth of our flagship SuperMassive Next-Generation Firewall solutions with Large Enterprise customers,” added Matt Medeiros, president and CEO at SonicWALL.

Apart from strengthening its position with corporate customers, the expansion into software and services will also improve Dell’s bottom line. Hardware-only margins are tight and not likely to improve. Software and services provide repeat business, and this is the second purchase by Dell’s new Software Group. The first was AppAssure in February 2012, described by Dell at the time as “the nation’s fastest-growing backup software technology company” with a reported 194% revenue growth in 2011.

Just as the return of Steve Jobs brought about the resurrection of Apple, we may be seeing the resurrection of Dell by the return of Michael Dell (he returned as CEO in 2007 to the company he founded in 1984).

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