Seeking Alpha
Long only, medium-term horizon, tech, solar
Profile| Send Message| ()  

Dell (DELL) is known as a hardware company. So it is big news when they launch a software setup.

The name at the top of the new setup is one many software mavens, including those in open source, know and respect: John Swainson.

Swainson is a director at several companies, most notably at Visa Inc. (V), and was formerly head of CA Inc. (CA) and IBM's own Application Integration and Middleware division., within the software group. So this guys not only knows enterprise software, but knows where the bodies are buried in that space, and (most important) knows who might be for sale at a bargain price.

That's important because if Dell is going to make a splash it's going to be through acquisitions. It needs to find software that is undervalued by the market, but is nonetheless good, useful corporate code. A whole raft of smaller software fry might now be in the company's sights, companies like Epic Systems, which is big in health IT, or Lawson Software, now owned by Golden Gate Capital. Or CA itself, which would be a big mouthful for Dell but a do-able deal if Swainson says it's worth doing.

Dell shares have been creeping up lately, and are now at a 52-week high of near $18, with a steady march upward since the first of the year. This means Swainson has currency to work with. He also has expertise around him, since Dell acquired Perot Systems a few years ago and is now as much a consulting and integration outfit as a computer maker.

It's all part of a necessary transition for Dell, which has invested $1 billion in clouds, billions more in Perot, and knows it has to replace PC revenues as its customers switch to new architectures. Offering software services, offering SaaS at the top of its clouds, could be the key to justifying its recent gains and setting the stock on its way.

There are lots of directions in which Swainson, and Dell, could go. Transaction processing has lots of innovation, and anything Dell buys gets instant validation. The same could be true in cloud software, where rival Rackspace (RAX) is using its support and sponsorship of OpenStack to move ahead. Health IT is still growing fast. Dell needs to protect its flanks in the government sector.

This is going to be an important story for investors, and DELL holders have a right to be excited about it.

Source: Dell Seeks To Become An Enterprise Software Leader