Dell forks out $155M for his brother's hosted e-mail company

All in the family: Analysts say buy is good idea for extending company's business services

Extending its business services abilities, Dell will buy MessageOne for about $US155 million in cash.

MessageOne hosts software to help companies manage, store and recover enterprise-level email. The business was co-founded by Adam Dell, brother of Michael Dell, the founder and CEO of the PC maker.

"[Monday's] BlackBerry outage is a pretty good example of [the risks] Dell and other customers face for email archiving and continuity," Dell spokesperson, Lynn Cranford, said.

She noted that the deal was expected to close in 30-45 days.

"We think email is one of the killer applications and MessageOne is a perfect fit for our suite of software services," Cranford said.

Gabriel Consulting Group analyst, Dan Olds, agreed that MessageOne's offerings were a good fit for a company looking to extend its range of business services.

"Dell's purchase may signal that they now realise that they can't rely on inexpensive hardware alone to become a player in the enterprise datacentre," he said. "Customers are looking for cost-effective solutions. They are less and less interested in buying servers from one vendor, storage from another, software from another and then integrating it themselves. They're looking for vendors that can provide pre-integrated solutions that can be installed quickly and with little disruption."

Olds said customers were also looking for products that minimised labour requirements.

"Dell needs these type of offerings to be competitive with the IBMs and HPs of the world," he said.

Cranford noted that once the deal closed, MessageOne would be absorbed into Dell Global Services. The MessageOne hosted services also will be available to Dell's partner channels.

Existing MessageOne customers should not be affected, she said. The same goes for existing MessageOne partners, many of whom provide MessageOne's hosted offerings as resellers.

Cranford said it was premature to talk about potential layoffs of MessageOne's 145 employees.

Forrester Research analyst, Stephanie Balaouras, called MessageOne a good cornerstone to support Dell's software-as-a-service (SaaS) strategy.

She said the hosted offerings from large systems and storage vendors, such as Dell, EMC, IBM, Seagate Technology and Iron Mountain, may cause corporate customers to re-evaluate their existing physical storage infrastructure investments.

"Anybody who is re-evaluating their backup investments or [email] archiving, or security around disaster recovery, I think you have to consider SaaS as an alternative now," Balaouras said. "With a lot of these large vendors behind these types of services offerings, you'll see a broader swatch of [enterprises] feel more comfortable with SaaS."

She did caution that Dell must work to overcome two major issues hampering SaaS adoption: concerns surrounding security and customer support.

Balaouras said Dell's purchase of MessageOne, coming on the heels of its acquisition of EqualLogic in November, may signal that the manufacturer is looking to build its own storage brand and outgrow its reliance on reselling EMC hardware.

"It's almost like on numerous fronts, [Dell] is competing with EMC more directly. Clearly, they want to do their own thing," she said.

In a statement, Dell CFO and vice-chairman, Don Carty, said that because Adam Dell and Michael Dell were brothers, there were related-party interests that required a series of steps to ensure that the transaction was considered objectively.

According to the company, Michael Dell was excluded from negotiating acquisition terms and from all aspects of the decision-making process, and independent members of Dell's board analysed the deal to make sure it was in the best interest of the company and its shareholders.

A company statement also noted that Michael and Susan Dell had indicated that the proceeds that they and their children's trust received from the acquisition would be donated to charity.

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