Dell to Acquire ConvergeNet for Storage Technology; Extends Total Storage Market Opportunity to $38 Billion.
Continuing its drive to become one of the top three storage vendors in the world, Dell Computer Corporation (Nasdaq:DELL) today announced a definitive agreement to acquire privately held ConvergeNet Technologies Inc. of San Jose, Calif.
ConvergeNet, a storage networking company focused on enterprise data-storage technologies for storage area networks (SAN), has assembled a leadership team with many years of experience from companies such as Hewlett-Packard Co., Storage Technology Corp. (StorageTek) and Sun Microsystems Inc.
Under the terms of the acquisition, Dell will exchange about 6.9 million shares of Dell common stock for all outstanding shares and options of ConvergeNet. Based on yesterday's closing stock price, the transaction has a current aggregate value of approximately $340 million. Upon completion of the transaction, which is expected within 60 days, Dell will record a one-time charge against after-tax earnings of five to seven cents per share for purchased in-process research and development expenses.
The boards of directors of each company have approved the acquisition. Completion of the transaction is subject to customary conditions. Morgan Stanley Dean Witter acted as a financial advisor to Dell in connection with this transaction; Salomon Smith Barney was an advisor to ConvergeNet.
The acquisition will bring SAN technology to Dell that will enable its current and future PowerVault storage products and other storage systems to connect to any Intel- or RISC-based server running UNIX, Solaris, Windows NT, Windows 2000, NetWare or Linux operating systems. This new ability to connect heterogeneous storage systems to servers of all types, regardless of operating system, expands Dell's total market opportunity to the entire open-systems storage market, which International Data Corp. estimates will total $38 billion by 2002.
Dell's acquisition of ConvergeNet will allow customers who own or buy current Dell PowerVault products to leverage and protect those investments well into the future, while offering those customers a clear transition path to technology of the future.
"The ConvergeNet technology combined with Dell's efficient, low-cost business model will mean our customers can get leading-edge data-center storage solutions at values unseen before in the industry," said Michael Lambert, senior vice president of Dell's Enterprise Systems Group.
Lambert continued, "Our customers want storage technology from Dell that connects with any open-standards server. The technology we acquire with ConvergeNet will help make that happen. ConvergeNet's technology fits our strategy to deliver storage area network solutions that speed access to and backup of enterprise data; simplify the configuration, allocation and management of storage systems; and help ensure that data is available all the time."
"ConvergeNet has created a leadership team, a fast entrepreneurial culture and a technology which complements Dell's commitment and direction for its storage business," said Dick Watts, president and chief executive officer of ConvergeNet. "We share a vision of the future of storage with Dell, and believe that the combination of our technology with Dell's dynamic, global business model will significantly change the storage market."
Upon completion of the transaction, Watts will become vice president and general manager of Dell's storage systems division, reporting to Lambert. This organization comprises the combined Dell and ConvergeNet storage teams.
Dell PowerVault Storage
Dell first entered the storage market last year with the introduction of the fibre channel-based PowerVault 650F storage subsystem, which now offers customers up to two terabytes of data storage in one rack. Dell expanded its line late last year with the SCSI-based (Small Computer System Interface) PowerVault 200S, the PowerVault 130T tape library for high-volume data backup, and the Dell PowerEdge Expandable RAID Controller 2 (PERC 2), providing high-performance data storage to PowerEdge servers with SCSI-based storage.
In 1999, Dell announced the PowerVault storage area network solution that was the first SAN from a major systems vendor for Windows NT environments. Dell also announced an original-equipment-manufacturer agreement with Network Appliance Inc. in late 1998 that led to Dell being the first computer vendor to bring Network Appliance's industry-leading storage technology to the Windows NT and Windows 2000 market. Dell launched the PowerVault 700 series of network attached storage products, called filers, in May of this year.
Ranked No. 78 among the Fortune 500 companies and No. 210 in the Fortune Global 500, Dell Computer Corporation is the world's leading direct computer systems company, based on revenues of $21.7 billion for the past four quarters. Dell designs, manufactures and customizes products and services to customer requirements and offers an extensive selection of software and peripherals. Information on Dell and its products can be obtained through its toll-free number 800/388-8542 or by accessing the Dell World Wide Web site at www.dell.com.
Special note: Statements in this press release that relate to future results and events are based on the company's current expectations. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, including the level of demand for computer systems and related data storage products; the intensity of competition; changes in technology; currency fluctuations; the cost and availability of certain key components; and the company's ability to effectively manage product transitions, to minimize excess and obsolete inventory, to continue to expand and improve its infrastructure (including personnel and systems) and to retain and integrate the acquired company's personnel. Additional discussion of these and other factors affecting the company's business and prospects is contained in the company's periodic filings with the Securities and Exchange Commission.
Dell and PowerEdge are registered trademarks. PowerVault is a trademark of Dell Computer Corporation.
Fortune 500 is a registered trademark of Time Inc.
ConvergeNet is a trademark of ConvergeNet Technologies Inc.
Dell disclaims any proprietary interest in the marks and names of others.
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|Date:||Sep 8, 1999|
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