* Offer at $27.75/shr, up $0.25 from last week's bid
* 17 pct discount from last week's announcement of talks
* Analysts say Dell may need to do more
* Dell, Compellent shares down
(Revises first sentence, adds analysts' comments and valuation
vs 3PAR, Isilon deals, updates stock prices)
By Ritsuko Ando
NEW YORK, Dec 13 Dell Inc DELL.O plans to buy
data storage company Compellent Technologies Inc CML.N for
about $960 million, in a bid to shake its reliance on hardware,
but it may need to do more to compete in new technologies like
Dell and rivals like Hewlett-Packard Co (HPQ.N) are all
trying to invest in corporate business technologies including
storage and services, as PC sales are hurt by low margins and
competition from new devices like Apple Inc's (AAPL.O) iPad.
The deal for Compellent comes three months after Dell lost
to HP in a bidding war for another storage firm, 3PAR, and as
large vendors are looking to buy small firms and become
"one-stop shops" for business technology.
Dell and Compellent said last week they were negotiating a
deal. Dell sweetened its cash offer to $27.75 a share from its
bid last week of $27.50 per share. Net of Compellent's cash,
Dell said it will pay $820 million.
The offer is a 17 discount to the shares' level before the
companies revealed last week that they were in talks.
Previously, the shares had risen 90 percent since late October
when Reuters first reported a deal was under discussion.
Analysts said the price seemed moderate. Dell's offer
values Compellent at around five times sales, compared with
multiples of over eight that HP offered for 3PAR and EMC Corp
EMC.N offered for Isilon.
"It looks like Dell got a really good deal relative to some
of the recent storage acquisitions, although Compellent doesn't
have such a high growth rate. I like it," said Robert W. Baird
analyst Jayson Noland.
Dell said on Monday the deal, expected to close in early
2011, should add to its adjusted earnings in fiscal-year 2012.
Compellent shares were down 3 percent, or 87 cents, at
$27.84 on the New York Stock Exchange, 9 cents above Dell's
CHASING THE CLOUD
Dell, HP, and International Business Machines (IBM.N) have
all been looking to broaden their offerings beyond computers.
Many corporate clients are looking for simpler ways to deal
with their massive volumes of data, and want fewer vendors for
all of their computing, networking and storage needs.
Data storage plays a crucial role in cloud computing, the
accessing of remote computing power and data over the Internet.
Dell entered this market in 2008 with its purchase of
Eden Prairie, Minnesota-based Compellent specializes in
storage and recovery of data for small and medium-sized
But analysts said Dell may need to do more. Its dependence
on hardware is becoming an increasing concern on Wall Street.
Goldman Sachs said in a report on Sunday that Dell and HP
were particularly vulnerable to the growing popularity of
tablet computers. He recommended a "sell" on Dell and HP while
rating Apple a "buy."
Dell shares were down 2.7 percent at $13.52 on Monday
afternoon, while HP shares were down 1.25 percent at $42.01.
While some analysts said Dell managed to avoid paying a
super-high premium, others said Compellent is too small to
enable Dell to compete effectively against an HP-3PAR
Kevin Hunt, an analyst at Hapoalim Securities, recommended
a "buy" on Dell but said he did not think the deal adds much
"Not a game-changer in our view," he said.
The recent spate of storage deals has left few potential
acquisition targets in the sector, however, although CommVault
Systems Inc (CVLT.O) as well as privately held Pillar Data
Systems and DataDirect Networks are also potential targets.
Some analysts and bankers say NetApp Inc (NTAP.O) could
also be a target -- but at a market capitalization of nearly
$20 billion, it could be too big.
Analysts said the latest move was sure to disrupt Dell's
sales partnership with EMC. Dell, however, said it would
continue selling EMC's storage products to customers who wanted
(Reporting by Ritsuko Ando and Paul Thomasch in New York and
Saqib Iqbal Ahmed in Bangalore; Editing by Unnikrishnan Nair,
Derek Caney and Matthew Lewis)