EqualLogic buy boosts Dell role in region

$1.4b cash deal for data storage firm is record for a start-up

Email|Print| Text size + By Robert Weisman
Globe Staff / November 6, 2007

Computer giant Dell Inc. has agreed to buy a Nashua data storage company that's become a leader in the red-hot field of "virtualization" for $1.4 billion in cash, the largest cash acquisition in history of a start-up fueled by venture capital.

The deal for EqualLogic Inc., disclosed yesterday, also marks the biggest purchase ever for Dell, a company that's historically shied away from acquisitions. It comes less than four months after the computer maker, based in Round Rock, Texas, snapped up Silverback Technologies Inc. of Billerica, another data center software firm, for an undisclosed sum.

Six-year-old EqualLogic, started by a team of former Digital Equipment Corp. networking engineers, sells hardware and software that simplify data storage for corporate technology administrators, enabling them to access storage from multiple machines simultaneously.

The technology is part of a move to "virtualize" computing and storage, boosting the productivity of servers and storage gear, at a time when companies and organizations, from airlines and banks to state and federal agencies, are generating and storing record volumes of data.

Shares of Dell fell 8 cents, or 0.27 percent, to $29.97 on the Nasdaq exchange yesterday as financial markets continued to retreat.

Dell, which has long marketed cobranded storage equipment with EMC Corp. of Hopkinton, has had little more than a sales force in New England until recently. With the EqualLogic and Silverback deals, the computer maker now is establishing a foothold in the region.

Michael Dell, chairman and chief executive, said his company will incorporate EqualLogic's technology into Dell's own PowerVault storage line but also will retain the EqualLogic brand and continue to market it through its own channel.

Dell said his company would maintain the EqualLogic operation in Nashua, which employs about 225 workers, and would invest in it in the future.

"The operation is expanding and will continue to expand," Dell said. "We would certainly hope to expand the resources of EqualLogic and be a bigger part of the community" in New England technology.

EqualLogic, which has taken in $52 million in venture capital since it was founded in 2001, registered in August for an initial public offering that was expected to raise $125 million, according to a statement filed with the Securities and Exchange Commission. But with the agreement to be purchased by Dell, the company will be withdrawing its IPO plan.

"We view this opportunity to become part of Dell as rocket fuel to achieve our vision," said Don Bulens, EqualLogic's president and chief executive. "This will accelerate our business everywhere."

Foreign sales represent just 15 percent of EqualLogic's revenue, for example, while Dell derives more than 40 percent of its revenue from overseas.

"Part of the appeal of a partnership with Dell is to broaden the global reach of EqualLogic," said Christopher Baldwin, general partner of Charles River Ventures, the Waltham venture capital firm that was an original backer of the New Hampshire company.

Under the deal, Bulens will stay at EqualLogic, which employs 384 people worldwide, reporting to Dell's business systems group.

Michael Dell said the deal would benefit his company's alliance with EMC, which owns a majority stake in VMware Inc., a company that makes a complementary virtualization software enabling computer servers to run multiple operations simultaneously.

The purchase of EqualLogic - which the National Venture Capital Association confirmed was the largest cash deal for a venture-backed start-up - is unusual in a number of ways. Dell has agreed to pay cash for the acquisition, and the dozen purchases of venture-backed companies that were larger than this deal all involved stock or a combination of stock and cash, according to NCVA data. And it marks the embrace by Dell, a company that's championed a direct-to-consumer sales model, of a technology that's been marketed successfully through a sales channel.

That sales channel could give Dell access to small and medium-size businesses, a critical market that has been difficult to penetrate, said Steve Duplessie, founder and senior analyst for Enterprise Strategy Group, a research firm in Milford.

"Dell has traditionally always been a supply chain, operationally brilliant company, but not a technology company," Duplessie said. "EqualLogic had some very interesting technology, and Dell thinks it can be turned into a multibillion-dollar standalone business."

Robert Weisman can be reached at

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