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Dell to Buy Quest Software

July 2, 2012

Dell will buy IT management company Quest Software for $2.4 billion to expand its software business and decrease its dependence on the declining personal computer market, Reuters reported.

Dell said it will pay $28 per share, trumping a bid from private investment firm Insight Ventures, adding that it expects the deal to close in the third quarter of its fiscal year 2013, which started February 4.

Reuters said Dell sparked a bidding war in June when it offered $25.50 per share for Quest, an enterprise management software maker, topping Insight’s initial offer in March of $23 per share.

Brian White, an analyst at Topeka Capital Markets, todl Reuters that Dell paid a reasonable price in line with Street estimates of 17 times 2012 earnings per share and 15 times 2013 EPS.

Dell said its corporate software and services business will show average annual growth of 10 percent until fiscal 2016.

The company has been diversifying its revenue base in the face of weakened consumer demand, giving up low-margin sales to consumers and moving into higher-margin areas, such as catering to the technology needs of small and medium businesses in the public sector and the healthcare industry.

The company has found itself lagging larger rivals such as HP and IBM in the race to become one-stop shops for corporate IT needs.

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