Dell's (DELL) strategy to remain relevant has gradually come into focus.
It's based on easing enterprises using Windows into choosing either on-premise or off-premise cloud solutions. Dell is a leading Windows OEM, and focusing on Microsoft (MSFT)makes sense.
But the strategy would not have made sense had it not been able to buy Quest Software (QSFT). Quest specializes in IT management, desktop virtualization and cloud migration. Specifically, it helps enterprises move from buying Windows on PCs and servers to buying Windows and its applications in the form of services.
In other words, Quest moves Microsoft customers to the cloud. That's what Dell wants to do, and who it wants to do it with.
Over the last few weeks Dell has seen the price for Quest bump up several times, pushed by private equity firm Insight Venture Partners. The final price, $28/share or $2.4 billion, represents more than 10% of Dell's equity value.
That's a hefty price. But it's well worth paying if it can convince customers that Dell does have a cloud strategy they can get behind, and if it can push Dell stock off its present Ford-like PE of 7.1. A bump of just $1.50/share would, after all, increase Dell's market cap more than enough to compensate for this deal.
This is the sixth acquisition for Dell, mostly involving software, since it named former Computer Associates CEO John Swainson its vice president-software in February. Swainson is best known for having headed the teams developing what is now the open source Eclipse project and Websphere middleware for IBM (IBM) in the 1990s.
The strategy here is somewhat different, tied much more closely to Windows, but it comes down to much the same thing, becoming the "one throat to choke" for enterprises that will deliver continuing cash flow over time.
Enabling a Microsoft cloud, and building one of Dell's own, is now the job, and Swainson's job is now going to move from acquisition to execution.
