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Dell to Step Up M&A


With $10 billion to spend, Dell is trying to hire IBM's M&A whiz. Here are six companies experts say should be on Dell's list

In a strategic shift, Dell (DELL) plans to get more aggressive about acquisitions. The Round Rock (Tex.) PC maker, led by CEO Michael Dell, has bought just 10 companies in the past three years, far fewer than rivals such as Hewlett-Packard (HPQ), IBM (IBM), and Cisco Systems (CSCO). But with PC sales slowing, Dell executives say that is going to change—and the company has amassed a $10 billion war chest.

In a sign of how serious Dell is about acquisitions, it is trying to recruit David Johnson, a 27-year IBM veteran who has cut Big Blue's key deals in recent years and left the company in May. IBM is suing to stop the move. Last month it filed suit against Johnson in a New York court, arguing that his joining Dell would violate a noncompete agreement.

Dell says its move to "inorganic growth" will go forward whatever the suit's outcome. Brian T. Gladden, chief financial officer, told BusinessWeek that Dell is eyeing tech companies that help businesses manage computer networks and equipment. He declined to discuss specifics, but here are six companies that analysts, bankers, and former Dell executives say merit a close look:

The Top Targets?

PALM

Market Value: $1.7 billion

Dell needs a mobile play. Palm's Pre, which goes on sale on June 6, is generating buzz as the next big competitor to Apple's iPhone and Research In Motion's BlackBerry. Palm also has hired away some Apple software vets, who may keep the Pre from being a one-hit wonder.

MOTOROLA PHONE UNIT

Market Value: $3 billion (est.)

Motorola's mobile phone operation is struggling. But it has spent the last year streamlining in preparation for a spate of product launches later this year. Banking sources say Dell is not interested now, but it may give Motorola another look if the phone unit delivers a hit product.

AFFILIATED COMPUTER SERVICES

Market Value: $4.3 billion

Dell has been beefing up its services business through acquisitions. Accenture, worth $22 billion, may be too rich a target for Dell. But Dallas-based ACS would be more manageable. And it's seeing solid demand for business process outsourcing and technology services.

BMC SOFTWARE

Market Value: $6.6 billion

BMC makes software that companies use to update and manage groups of PCs and server computers. With an acquisition, Dell may be able to help BMC tap a broader range of corporate customers and boost BMC's sluggish growth rate.

SYMANTEC

Market Value: $12.9 billion

Symantec would give Dell the leading provider of security software for PCs, a business that has held up well in the recession. The company could also help Dell grow in other areas, such as online storage and services.

EMC

Market Value: $25.1 billion

A Dell-EMC deal would probably have to be a merger rather than an outright acquisition. The data storage king has an enviable customer base. And EMC owns another prize: VMware, a company that helps businesses manage resources in their data centers with virtualization technology.

Ricadela is a writer for BusinessWeek in Silicon Valley. Edwards is a correspondent in BusinessWeek's Silicon Valley bureau.

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