Dell buys network security company SonicWALL, adds nearly 1,000 employees
Dell this morning announced its intent to acquire SonicWALL, a provider of enterprise-grade network security and data protection solutions. — Financial terms of the acquisition were not disclosed …
Context & Ripple Effects
Dell has been telegraphing this move for months: in February 2012 it declared it is no longer a PC company and is refocusing on enterprise IT services, after exiting netbooks in late 2011 and pivoting its tablet hopes to Windows 8 over Android. SonicWALL extends that pivot into security, following Dell's earlier acquisition of cloud-integration firm Boomi in 2010 as another enterprise-services building block bought rather than built.
The story traveled unusually wide for an undisclosed-terms deal — pickups at TechCrunch, InfoWorld, The Register, AllThingsD, Between the Lines and Bloomberg all on or about March 13, 2012 — suggesting the market reads it less as a tuck-in and more as confirmation of Dell's strategic repositioning.
First-order effects
- Nearly 1,000 SonicWALL employees join Dell immediately, giving Dell an installed base of enterprise firewall and data-protection customers it can cross-sell its servers, storage and services into.
- With financial terms undisclosed, investors and analysts have to price the deal on headcount and strategic fit alone — no disclosed multiple to benchmark against.
Second-order effects
- Rivals in the converged hardware-plus-security stack — HP, Cisco, IBM — face pressure to match Dell's ability to bundle firewalls with commodity infrastructure in mid-market deals where price wins.
- Independent network-security specialists become more attractive targets, since hardware giants now need owned security IP to compete for the same contracts.
Third-order effects
- The deal fits a structural pattern of PC makers converting themselves into diversified enterprise IT vendors through serial acquisition — with each purchase raising the classic specialist absorption risk that an entrepreneurial security culture dilutes inside a hardware giant.
- If the buy-not-build approach holds, the long-run shape of the industry tilts toward a few vertically integrated enterprise stacks, squeezing standalone appliance vendors between platform bundles.
The trend: Legacy PC vendors are acquiring their way into enterprise security and cloud services, trading consumer exposure for recurring infrastructure revenue.