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Why Is Dell Selling Off Its Software Division?

It has been less than three months since Dell sold off its services arm. Now its software business is being offloaded. Let’s find out the reason..

This week Dell made news with a blockbuster deal to sell its software division to private equity firm Francisco Partners, as well as hedge fund Elliott Management.According to Reuters, the deal is worth more than $2 billion. The move follows Dell’s $3bn sale of its services arm to NTT, announced in March.

Dell-Selling-Off-Software-Division

According to industry watchers, Dell’s software division has struggled for a number of years.

Gartner’s Vendor Rating: Dell report stated that the IT supplier’s software business has underperformed the overall software market for the past three years. According to Gartner, this has been a result of the challenges of integrating a diverse portfolio of software products.

The report gave Dell Software a “Caution” rating.

Also, according to the New York Times, Elliott Management knew Dell was interested in selling its software division and was familiar with that sort of corporate-focused business. Jesse Cohn, the fund’s head of United States equity activism, quietly built a team named Evergreen Coast Capital that could buy companies like a true private equity business. This new affiliate actually made the deal with Dell.

The company’s software division includes products for advanced analytics, database management, data protection, endpoint systems management, identity and access management, Microsoft platform management, network security and performance monitoring.

The brands being sold include Boomi, for cloud integration; Toad and Statistica business intelligence and analytics tools; SonicWall and SecureWorks networks, endpoint security and intrusion detection products; the Quest and Kace suite of tools for Oracle, SAP, Windows, Exchange, SharePoint and Active Directory management.

The deal does not appear to include Wyse, which is a separate division specialising in desktop virtualisation and thin client computing.

Some Dell partners say the company’s best software days are already in the past, and the sale will offset the company’s costs when it completes its purchase of EMC.

EMC shareholders are scheduled to vote on the acquisition next month.

Despite potential friction from EMC, the two-year deal will be extended to a multiyear agreement.

The sale is a strange move for a company trying to reinvent itself in a business environment that’s rapidly changing thanks to cloud computing and mobile devices.

 

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