Dell acquires IP SAN vendor EqualLogic for $1.4 billion

Dell announced Monday plans to buy IP storage-area network vendor EqualLogic for $1.4 billion, strengthening an already booming part of Dell’s business.

The news of the planned deal comes just a week after CEO Michael Dell hinted the company could be in the market for some bigger-than-usual acquisitions.

EqualLogic, formed in 2001, sells iSCSI storage appliances and in August filed to go public, something it now won’t have to do.

Dell will add EqualLogic’s PS Series iSCSI appliances and technology to its portfolio of PowerVault and Dell/EMC storage arrays, part of a $600 million business for Dell in its second fiscal 2008 quarter ended Aug. 3 (server revenue totaled $1.6 billion in that period). The company has not clarified its plans to rebrand EqualLogic’s products, but says that it will still sell them through the extensive channel EqualLogic has established. Dell sells a lot of its storage products through EMC, making up 10% of EMC's accounts receivable in 2006.

"This acquisition is a key part of our strategy to simplify IT and to drive virtualization from Dell's enterprise portfolio," says Mike Arterbury, director of storage operations.

EqualLogic’s products have been adopted in corporations that are also deploying virtualization. Dell expects that adding them to its portfolio will allow customers to further simplify their IT setups.

“EqualLogic did a brilliant job of marrying up storage and virtualization,” says Steve Duplessie, senior analyst for the Enterprise Strategy Group.. “The company was basically giving away VMware with their machines. It was a great sales job.”

Duplessie’s reaction to the sale price was “You’ve got to be kidding me.”

Fellow analyst Greg Schulz of Storage I/O also found the price eye-opening, but said: “If you go by the recent valuation of storage IPOs lately, it is more in line.”

EqualLogic counts among its customers Dickinson-Wright, the Royal British Legion and Babson College. 

Dell’s history of acquisitions has been limited primarily to services organizations and recently consumer gaming vendors. The acquisition of EqualLogic would mark Dell’s first buyout of a storage vendor since it snapped up early virtualization company ConvergeNet in 1999 for $348 million. Subsequent work with ConvergeNet failed to generate a product.

The EqualLogic deal is expected to close late in Dell’s fiscal fourth quarter (which ends in February) or early in its fiscal first quarter (which ends in May).