Dell takes deeper dive into networking, buys Force10

Fills out Dell's data center portfolio with core, top-of-rack switching

Dell this week said it will acquire switch maker Force10 Networks for an undisclosed sum.

Published reports say Dell paid $700 million in cash for privately-help Force10.

Dell said Force10's data center switches will complement its own data center server and storage portfolio, and enable it to offer customers a broader range of data center and enterprise products.

PERSPECTIVE: Dell and Force 10: What it means

Dell, citing data from IDC, says it is the leading x86 server provider in the United States and No. 2 worldwide. Force10 had a 0.6% share of the $4.74 billion Ethernet switch market in the first quarter, and a 0.4% share of the $21 billion market in 2010, according to Dell'Oro Group.

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Force10 specializes in high-performance, high-density switches for data centers and high-performance computing environments, such as those found in research labs, Web hosting companies and financial trading organizations. It has annual revenue of just less than $200 million and about 80% of its business is in North America, even though it operates in more than 60 countries worldwide.

Force10's latest offerings include data center core and top-of-rack switches designed to handle zettabytes of data with 40/100Gbps Ethernet interfaces.

Dell says Force10's Open Cloud Networking strategy, which stresses automation and virtualization based on open standards, is consistent with its own Virtual Era design philosophy. Virtual Era is designed to reduce costs and streamline data center operations through adoption of standards-based system for integrating data center servers, switches and storage, and simplified deployment.

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Dell and Force10 have been sales and marketing partners for six years. Acquiring Force10 is likely to end Dell's OEM arrangement with Brocade to private label and resell Brocade's Foundry network switches. Shares of Brocade were down about 7% on Wednesday after an article in Bloomberg quoted an unnamed source saying that Dell passed up Brocade to buy Force10.

Force10 was founded in 1999 and is headquartered in San Jose, Calif., with research and development operations based in Silicon Valley. Dell also plans to keep Force10's existing operations in Chennai, India, as it continues to invest in additional engineering and sales capability to grow this business. Dell said it is also committed to maintaining and growing Force10's channel sales and support program.

The transaction was approved by the board of directors of each company. Additional terms were not disclosed. The acquisition is expected to close in late summer.

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Dell, Brocade OEM relationship 

The deal also might quell rumors -- temporarily, anyway -- that Dell might buy Brocade

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