Dell's $960 Million Bid for Compellent Draws Questions

Dell Inc. said today that it has offered $960 million or $27.75 per share for Compellent Technologies Inc., a publicly-held, Eden Prairie, MN-based provider of a virtualized storage platform it has termed Fluid Data.

The parties said that the deal has been approved by the boards of directors of both companies. The transaction, which requires shareholder and regulatory approval, is expected to close early next year, the companies said.

In Monday trading, Compellent’s stock hovered slightly above Dell’s offer, closing at $27.98. On December 8, the stock reached $34.16, its 52-week high. In the past two months, the stock has nearly doubled from its October 8 closing price of $17.10 on whispers it might be a buyout target.

The offer drew immediate attention from three law firms, two of which, Houston, TX-based Briscoe Law Firm PLLC and Dallas, TX-based Powers Taylor LLP issued a joint statement, and another Finkelstein Thompson LLP, based in Washington, D.C., in which they said they intend to investigate, on behalf of Compellent’s shareholders, possible legal claims against Compellent’s board for accepting the offer.

All three firms claimed that Dell’s per share offer is substantially lower than Compellent’s high water mark and inconsistent with a $40 price target set by one financial analyst for the stock.

“Because Compellent Tech shares traded at over $34 per share in the week prior to the merger announcement, we feel that the price offered to Compellent Tech shareholders is unfair,” said Willie Briscoe, a principal in the Briscoe Law Firm.

It could not be determined if some of Compellent's shareholders hired the law firms to investigate Dell's offer. Neither Dell nor Compellent publicly commented on the issue.

Dell to retain Compellent operations, channel program

Dell said that it will retain Compellent’s current operations and also will allot additional funding to the storage maker’s engineering, support, operations and sales efforts to grow the business.

In addition, Compellent’s channel program, which provides 100 percent of the vendor’s sales, will not be altered, Dell said. Dell’s existing channel partners will be encouraged to contact Compellent to gain authorization to sell the vendor’s products.

Dell said that the Compellent product line will be made available immediately to its direct sales force.

“The Compellent storage platform will enable Dell to provide customers additional mid- and high-end network storage solutions that simplify and reduce the cost of data management,” said Brad Anderson, Dell senior vice president, Enterprise Product Group.

“Compellent’s design focus on intelligently managing data to increase efficiency, agility and resiliency is consistent with Dell’s approach of building solutions that can quickly scale to meet the most demanding enterprise environment,” Anderson said.

Phil Soran, Compellent chairman and chief executive, said the acquisition is the “next logical step in our goal to scale our products, channel and team worldwide.”

He said that the deal will “accelerate the adoption of our virtualized platform, Fluid Data, to redefine the value of enterprise storage for data centers and cloud computing.”

Compellent’s sales, profit up in most recent quarter

Dell’s aggregate purchase price for Compellent is $820 million, net the storage vendor’s cash. According to Compellent’s most recent U.S. Securities and Exchange 10Q filing, for its quarter ended September 30 the vendor commanded some $112 million in total current assets.

According to SEC documents, Compellent posted sales of about $125 million for its fiscal year 2009. For its fiscal third quarter ended September 30, 2010, the company recorded record sales of $42.1 million and $3.3 million in profit.

While acquiring Compellent adds to Dell’s storage portfolio, which already includes PowerVault, EqualLogic and certain EMC Corp. products, it also better arms the vendor to compete in the storage market and offloads some of its revenue and profit burden from desktops and notebooks.

In recent months, Dell competitors Hewlett-Packard Co., EMC and IBM Corp. have snapped up storage companies. In September, HP outbid Dell for 3Par Inc., and, in November, IBM bought Netezza Corp. and EMC landed Isilon Systems Inc.