But the move is a clear indication that CEO Michael Dell knows he has had the wrong exemplar in Hewlett-Packard (HPQ) for some time now.
His new model is IBM (IBM).
Cloud is the new IT buzzword. Combining virtualization with distributed computing, cloud lets enterprises consolidate server farms, scale new services quickly and handle a rush of traffic. With more companies doing mass promotions like Chick Fil-A's free breakfast deal, built around web registration, demand for cloud is certain to grow.
Dell had announced earlier this year its intent to put $1 billion into new data centers and get into application hosting. This led some to speculate it might be interested in buying Rackspace (RAX), the OpenStack sponsor and web host, which is based just down I-35 in San Antonio.
But it's clear Dell would rather bury Rackspace than join it. The company bought SecureWorks in January, and now with the VMWare deal says it will emphasize security and privacy concerns in its offer, which will include public clouds, private clouds and hybrid clouds.
Cloud pioneers like Rackspace sport PE multiples 10 times Dell's own current multiple of 8.02. Dell hopes that by offering a variety of clouds – it will also use Microsoft's Azure architecture and a so-far unnamed open source alternative (probably OpenStack) – it can narrow that gap.
But Dell made its name on building computers, not clouds. Its idea of services has always meant programming services, not software as a service. The company claims it will start taking customers in October and open a network of data centers worldwide by the middle of next year.
If you believe it can succeed in becoming a global cloud host, Dell is a bargain at these prices. But you might also want to consider that extraordinary claims demand extraordinary proof, and demand a little before you pile in.