As Dell Shifts To Software & Services, Announces Plans To Buy SonicWall

Computer manufacturer Dell announced today that it has signed a definitive agreement that will allow it to acquire SonicWall, a security vendor specializing in firewalls, network security and data protection. The move will help Dell round out its security solutions portfolio, the company reports, which currently includes Dell’s SecureWorks security services, cloud security solutions, data encryption solutions and Dell KACE vulnerability and patch management.

The acquisition is more than just a “beefing up” of Dell’s security line up, though – it’s representative of a shift in Dell’s overall strategy as a technology firm.

The move comes shortly after last month’s announcement regarding the formation of a new Software Group within the company, designed to enhance Dell’s solutions capabilities. Dell hired John Swainson to serve as President of the Group. Swainson, whose background includes over 26 years at IBM, and 4 years as the CEO of CA, Inc., took the position on March 5th – only a week ago. And boy, did he move fast.

Although terms of the deal were not disclosed, SonicWall is no small potatoes. In 2010, it was bought for around $717 million led by private-equity firm Thoma Bravo LLC.

Founded in 1991, SonicWall got its start selling Ethernet cards, hubs and other networking equipment. It later shifted into firewalls and VPN appliances for the SMB market and went public on NASDAQ back in 1999. Today, SonicWall has 300,000 customers in 50 countries, 950 employees and a channel program with 15,000 retailers, which Dell plans to integrate into its own PartnerDirect program. When the deal closes in Dell’s Q2 2013 (early August), resellers from both Dell and SonicWall will be about to sell the enhanced security line up.

SonicWall also has over 130 patent apps, with 64 issued to date, which Dell rightly states as another reason why the acquisition has value.

Explains Swainson in a release, “SonicWALL gives Dell access to unique intellectual property resources and technology that position us well in fast growing parts of the software security business.”

Dell also told Wall St. this morning that SonicWall had approximately $260 million in revenue over the last 12 months, and it expects the acquisitive to be accretive to earnings in the second half of its fiscal 2013.

The acquisition, beyond being an attempt to beef up Dell’s security portfolio, is also indicative of a bigger shift for the computer maker – a move to software and services boosted by acquisitions, with a special focus on business customers. The change is reflective of an overall shift in computing, and especially in personal computing, which is a decreasing part of PC manufacturers’ business, and Dell’s in particular. In Dell’s last earnings call, the company noted that in its consumer business, revenue was down 8% year-over-year and client growth was down 6% in the same time frame.

Companies that once made their bread-and-butter putting PC’s in every home – Dell, HP, and IBM, for example – are now moving towards high-margin software and services to make up for the fact that consumers are now using mobile devices and Apple computers in increasing numbers.