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July 02, 2012

Dell Buys Quest in a Bid to Get Away from Declining PC Market

By Jacqueline Lee, Contributing Writer

Two competing companies have been vying over the past couple of months for the chance to purchase Quest Software. One company is the private investment firm Insight Venture Partners. The identity of other firm, until now, remained the subject of speculation.

The mystery evaporated this morning when Dell and Quest confirmed they had entered into an agreement allowing Dell to purchase the software company. According to Reuters (News - Alert), Dell originally offered between $23 and $26 per share in May to purchase Quest.

Reuters now reports the agreement was reached after Dell (News - Alert) upped its offer to $27.50 per share.

The total purchase price, while not confirmed by Dell or Quest, is said to be approximately $2.32 billion. Dell’s offer reportedly beat an Insight Venture offer of $25.75 per share, or $2.17 billion.

For Dell, the move to purchase Quest spells a step away from the personal computer market. Mobile devices like Apple’s (News - Alert) iPad have caused a significant deceleration in the PC market. Dell executives reportedly consider software and services to be key growth areas for their company as it moves forward.

Quest was originally interested in a $2-billion cash offer from Insight Venture after disclosing a “material weakness” in internal controls over its financial reporting. While former Quest CEO Doug Garn reportedly stepped down due to poor health, many speculate that current CEO Vinny Smith took the reins because Garn was reluctant to certify the company’s annual report.

Smith has a history of litigation with the SEC (News - Alert). In 2008, he agreed to step down as Quest CEO and pay $300,000 to settle SEC allegations that he had backdated Quest stock options.

According to PCWorld, president of Dell’s software group, John Swainson, said Dell has no intention of becoming a software-only company. The company does, however, want to build software products to sell alongside its server, storage, services and networking offerings.

To expand its software portfolio, Dell has acquired eight other software companies in the past year.

Swainson said Dell’s first objective is to develop mobile device management software to improve both device security and data management. Dell’s other objective is to ship both consumer and business tablets equipped with the Windows 8 operating system.

Additional plans include exploring analytics and business software and building integrated appliances and servers to work in conjunction with the software.

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Edited by Braden Becker
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