Dell Bolsters Security Portfolio With SonicWall Buy

Dell is acquiring network-security and data-protection tool provider SonicWall. Terms of the deal were not announced, but analysts have estimated it at between US$1 billion and $1.5 billion.

This is the latest in a series of acquisitions Dell has made in recent months. It has acquired Force 10, Perot Systems and SecureWorks. All of these companies focus on different areas: Perot Systems is a consultant; SecureWorks offers managed security services. The addition of SonicWall rounds out Dell’s portfolio and lends support to Michael Dell’s recent assertion that Dell is no longer just a PC company.

“It’s an end-to-end IT solutions company,” he recently said at a public event.

The acquisition of SonicWall was made by the company’s recently-formed software division, headed by John Swainson, CA’s former CEO.

Dell did not respond to our request for further details.

Outside Its Bailiwick

Dell already had functionality in the security space, but SonicWall’s feature set is very complementary to that, Charles King, principal of Pund-IT, told the E-Commerce Times.

“It is getting a company that builds firewall management solutions, which fills a hole in Dell’s portfolio,” he said.

“SonicWall is a known entity with a strong customer base,” King added. “All in all, this a good acquisition.”

It has been clear for some time Dell is trying to stretch beyond its traditional bailiwick of hardware and servers, Laura DiDio, principal of ITIC, told the E-Commerce Times.

“Dell has challenges in its traditional market space of the desktop and server, but especially the desktop space,” she said. “These businesses have always been high volume and low margin, but the margins in recent years have become exceedingly thin.”

Dell is expanding into other areas, including storage, virtualization and security, and is focusing more on targeted partnerships, she said.

It has also made other business decisions with an eye not on the immediate bottom line but on the long game, Didio continued.

“Its decision to move its support and services operations back onshore falls in this category. It got a significant boost in customer satisfaction when it did so,” she observed.

A Focus on Software

That the acquisition was made through its new software division is also telling, King said. “It underlies Dell’s intention to continue to grow its software business.”

Even with the focus on software, though, King doesn’t see Dell deviating from its vision of serving as an end-to-end provider of business solutions. “This has been Dell’s evolution for some time, ever since Mike Dell returned to the company,” he said.

“It has long recognized the necessity of changing from basically a box manufacturer — which at one time enjoyed healthy margins — to a company that has a deep understanding of its and other companies’ supply chains,” King explained.

More Acquisitions to Come

Expect Dell to continue to make acquisitions, Didio said. “Wall Street analysts do not like to see companies like Dell just rest on their laurels. They want to see them making investments at a regular pace to stay competitive and fuel expansion.”

Not that acquisitions are a risk-free strategy. It is a corporate art, given the number of deals that ultimately fail. Few firms can consistently do it as well as, say, Oracle.

The SonicWall acquisition is a smart one for Dell, Didio said, even though she thinks it may not deliver a bump to the company’s earnings for at least a year or possibly two.

However, “it has great synergies with Dell’s existing product line. There are also great upsell and cross-sell opportunities with SonicWall’s installed base.”