Dell (Nasdaq:DELL) tries to turn itself into a services firm like IBM (NYSE:IBM) or Hewlett-Packard (NYSE:HPQ) by acquiring Quest Software (Nasdaq:QSFT) . Winning the price war is not always the best way to create shareholder value but that’s just what they did.
No word from Dell about when the deal will be accretive so investors are just expected to hang onto their hats.
The $2.4 Billion price tag is about 20% of Dell’s cash balance. So excuse investors who want to see something come of this. One cannot but be haunted by Morningstars Take on Quest “…operates in an environment that is investment intensive and fiercely competitive, making it unlikely the firm can sustain its profitable growth in the long-term.”
Dell you need to provide a lot more colour on this one. And we don’t mean red ink.
George Gutowski writes from a caveat emptor perspective.
- $Dell Curious Dividend Strategy. True Religion, Just Another Magic Trick or Incredibly Good Strategy. $IBM $HPQ (financialskeptic.wordpress.com)
- Dell buying Quest Software for $2.36 billion (sfgate.com)
- Quest A Deal Dell Had To Do (seekingalpha.com)