Dell To Acquire Force 10 Networks


Dell Wednesday said it will acquire Force 10 Networks, a move that confirms speculation that the computer maker would acquire a networking vendor to give the company a broader converged networking and data center play to compete with HP and Cisco.

Financial terms were not disclosed. In a statement, Dell described the acquisition as a "natural complement to Dell's server strength," and expects the acquisition to close in late summer.

"Dell's approach of offering customers open, capable and affordable solutions aligns with Force 10's approach to offering customers new levels of flexibility, performance, scale and automation which is fundamental to changing the economics of data center networking," said Brad Anderson, senior vice president of Dell's Enterprise Solutions Group, in a statement.

Dell has been in an acquisitive mode as of late, focusing primarily on storage companies like Compellent. In recent weeks, speculation held that Dell would look to acquire Brocade or another networking and data center-centric vendor.

Force 10, based in San Jose, Calif., was founded as Turin Networks in 1999 and did about $200 million in revenue last year. In May, the company changed the IPO plan it had first announced in March 2010, amending its filing with the SEC to reflect $100 million in planned stock sale instead of the original $144 million it had first stated.

The company has a research and development center in Chennai, India, which Dell said it plans to keep.

Initial analyst reaction to the deal was positive. In a research note, Stifel Nicolaus analysts Aaron Rakers and Matthew Nahorski, described the acquisition as a "clean move" by Dell to go further into networking, where its product portfolio has largely consisted of OEM agreements with Aruba, Brocade and Juniper.

"While this move comes earlier than we would have expected (thought that Dell was just starting to make moves to focus succinctly on a stand-alone networking strategy over the past six months), we view this as a positive/clean move into the networking market (vs. an acquisition of a Brocade) – clearly focused on competing against Cisco’s UCS (our checks very positive here), HP’s Converged Infrastructure strategy (BladeSystem Matrix; ProCurve, 3Com, and Virtual Connect/Flex-10), and IBM’s acquisition of Blade Network Technologies," the analysts wrote.