Dell’s Quest for Quest
Dell is making a $2.32 billion bid for Quest. It tops a $2.2 billion offer from private equity firms Insight Venture Partners and Vector Capital.
That puts Quest’s value at $27.50 per share. A counter bid is expected from Insight and Vector.
In May, Quest decided to go private when it received a bid for $23 per share from Insight. That prompted Dell to make its own bid. Talks stalled in early June.
Quest is primarily known for its enterprise management software.
The offer points to Dell’s focus on the enterprise and decreased emphasis on its PC business.
A Gartner report shows that worlwide PC sales are slowing. Dell’s share of the PC market slipped to 11%, down 1.4% compared to the same time last year.
In Asia, according to Seeking Alpha, its PC shipments actually declined due mostly to Dell’s focus on enterprise solutions.
Margins are generally higher for enterprise solutions compared to PCs.
Seeking Alpha:
The enterprise solution business has margins of 9%. This is better than the thin margins of its consumer business at only 3%. For the last fiscal year, its operating margins have improved to 6.5%, but still lower than the industry’s average of 7%. Going forward I expect that Dell margins will be higher than average operating margins of 6% as its enterprise solutions business will have higher income contribution.
According to All Things D, Dell projects data center technology and products to grow more than 40% to more than $27 billion by 2016.
Dell has said that it plans to make acquisitions to bolster its enterprise business.
That’s where Quest fits in. Quest’s sweet spot is in the enterprise management space. It has a decent desktop virtualization solution with vWorkspace. It fits with Dell’s acquisition of Wyse, another example that shows Dell’s focus on the desktop and application management.
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