Deals

Dell Acquisition Keeps E-Mail Services Provider in Family

Dell has added another member to its growing family of acquisitions, although this latest addition already had the Dell pedigree, in a sense.

The Round Rock, Texas-based computer maker said Tuesday it had agreed to buy Austin, Texas-based e-mail services providerMessageOne for about US$155 million in cash.

The addition of MessageOne is largely an all-in-the-family transaction. The firm was cofounded by Adam Dell, brother of Dell founder, chairman and chief executive Michael Dell, who himself is an investor in Impact Venture Partners and Impact Entrepreneurs Funds, which are part owners of the company. Adam Dell manages the funds.

MessageOne markets software that assists companies in managing and archiving e-mail, minimizing outage and preventing data loss.

Diversification Move

The acquisition represents a key move into IT services for Dell, said Charles King, a principal of Pund-IT.

“Now, Dell has fully mature offerings to online backup for e-mail, which I think is a service that will be particularly attractive to its enterprise customers,” King told the E-Commerce Times. “MessageOne has a large group of fairly impressive users, so it has a solid set of proven customers.”

An enterprise-class e-mail backup and archiving solution can be deployed in a number of ways, he added.”A customer can get service and configure it to reach whatever service level that the business needs to comply with, whatever its various international service levels. This gives companies a great deal of latitude in the kind of options they have.”

Businesses have traditionally handled e-mail archiving and other IT-related problems internally, but that’s not the case anymore, King said.

“E-mail continues to be one of the highest growth parts of data storage,” he pointed out. “When you look at the volume of storage required to store and make e-mails available, farming that out to a trusted third-party customer makes sense for a lot more companies. Otherwise, they’re stuck with having to add storage hardware and increase the size of their IT staff to support those assets.”

Versatility in Application

That was precisely the thinking behind the deal, said Steve Schuckenbrock, president of Dell Global Services.

“MessageOne’s services not only meet the needs of large companies — with an impressive roster of existing Fortune 500 customers and marquee partners as proof points — but can also scale down cost-effectively to meet the needs of small and medium business customers,” he said.

Michael Dell, his wife Susan and their children’s trust are expected to receive about $12 million from the deal. Adam Dell will get about $970,000. The brothers’ parents, who also had invested in MessageOne, will receive about $450,000.

Michael Dell, who last year returned to leadership of the company he launched 24 years ago — now the second-largest manufacturer of personal computers in the world — plans to donate the proceeds from the deal to charity. He did not participate in the negotiations or the decision to make the acquisition, the company said.

Another Buyout

MessageOne is Dell’s second acquisition in a month. The company recently completed a $1.4 billion buyout of data storage technology specialist EqualLogic — the largest acquisition in Dell’s history.

“It’s kind of the trend — the cloud computing Software as a Service,” said Gordon Haff, principal IT advisor for Illuminata.

Computer makers are better served by not having to rely on outside software firms, he told the E-Commerce Times. “The problem that system makers have here is that they’re kind of at the mercy of whoever provides the service.”

The move into IT services is shrewd, if not exactly revolutionary, Doug Bell, a research analyst with IDC, told the E-Commerce Times.

“This seems to be a new strategy for Dell, as far as acquiring software service companies,” he noted.

“Their competitors have been doing it for a little while, so Dell is a little late to the game. But Dell realizes the necessity of diversifying their portfolio of offerings, and they realize that Software as a Service programs are really beneficial. It’s another added feature that Dell can offer to their customers. It’s not just hardware anymore. Customers are looking at what’s in the software side of things as well.”

Dell stock was trading at $20.01 at midday on the Nasdaq stock exchange, having closed Monday at $19.93. The stock had a 52-week range of $18.87 to 30.77

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