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Dell, No Longer Satisifed to OEM Networking, Acquires Force10 Networks
| Jul 21, 2011 | Data Center Technology, Enterprise Networking, Transport and Routing Infrastructure
| Analysts: Mike Spanbauer, Glen Hunt
Event Summary
July 20, 2011 - Dell to acquire Force10, filling a much needed networking gap with a data center portfolio and carrier grade technology. Force10, a 12 year old company, has long been a strong player in high performance computing and Web edge environments, however had recently struggled without an IPO and limited new capital investment. Dell provides a pillar upon which Force10 and Dell together can address modern enterprise data center requirements and grow out from each other’s respective market strengths.
Quick Take
Analytical Summary
• Current Perspective: Positive to both Force10 and Dell as each complements one another very nicely. Force10 has just recently refreshed its data center portfolio and possesses a platform that Dell lacked internally (though had OEMed), lending credibility and long term viability to Force10, and the technology roadmap and lab that Dell lacked to compete with HP, Cisco and IBM. Although neither party revealed the terms and conditions of the deal, given Force10’s viability and Dell’s statements regarding no change in street guidance and accretive revenues in its 2H FY2013, the deal appears to have a significant upside for the acquirer.
• Vendor Importance: Very high to Force10, and high to Dell, because Force10 had little hope to make a successful IPO in this current economic environment and as a result customers had concerns about the long term viability of the offering. These concerns will be gone though once the deal closes. Additionally, Dell had been dependent on the roadmap and relationships it had with previous OEM suppliers (of which Force10 was one, though smaller in stature than Brocade and Juniper), which left it exposed vs. competitors in the fully virtualized fabric of modern data centers. This is a very smart marriage of a technology player and a global data center company.
• Market Impact: High on the data center technology but low on carrier edge and aggregation markets, as this acquisition moves demonstrates that Dell is no longer willing to take what OEM partners offer and instead wishes to control its networking offering in the data center and carrier edge. Force10 is once again a viable and long term investment partner for customers seeking high performance networking solutions and this will change the competitive dynamic significantly in those environments. In recent quarters, Force10 maintained its carrier business, but exclusively focused on the data center.
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Competitive Strengths and Weaknesses
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Dell Announces Intent to Acquire Datacenter Networking Leader Force10 Networks
• Force10 provides high-performance solutions designed to deliver new economics by virtualizing and automating conventional datacenter and cloud networks
• Force10 technology complements and accelerates Dell’s datacenter solutions portfolio, enabling it to offer customers a broader range of enterprise offerings
Date : 7/20/2011 - Dell today announced it has signed a definitive agreement to acquire Force10 Networks, Inc., a leader in high-performance datacenter networking. Force10’s networking capabilities complement Dell’s datacenter solutions portfolio, enabling it to offer customers a broader range of enterprise offerings.
Dell has taken significant steps over the past three years to expand its enterprise portfolio to offer customers a complete range of datacenter products and solutions. This includes developing an integrated stack of leading server, storage, networking and services resources to help customers streamline operations, reduce IT costs, manage data growth and simplify management. The acquisition of Force10 and investment in networking is a natural complement to Dell’s server strength. Dell is the leading x86 server provider in the United States and No. 2 worldwide, according to first quarter 2011 IDC data.
Force10 Networks Leadership
Force10 is a global technology leader in datacenter, service provider, and enterprise networking. It is nearly a $200-million company, based on trailing 12 months revenue, with approximately 80 percent of its business in North America and operating in over 60 countries worldwide. Force10’s Open Cloud Networking is based on open standards, automation and virtualization and is very consistent with Dell’s design philosophy. Force10’s technology allows customers to transform their network infrastructures into an open, reliable and scalable datacenter and cloud computing fabric.
Force10 provides global service and support capabilities around the world through a direct sales force and an extensive network of channel partners and systems integrators. Much like past acquisitions of Compellent and EqualLogic, Dell is committed to maintaining and growing Force10’s channel program. Force10’s customers include leading Web 2.0 and Fortune 100 companies, Internet portals, global carriers, leading research laboratories and government organizations with some of the world’s most demanding network environments.
Distinguishing characteristics of Force10 include:
• Flexible, open automation and management
• Massively scalable core datacenter network at a fraction of the cost
• Automated policy configuration and mobility
Dell Leadership in the ‘Virtual Era’
In the ‘Virtual Era,’ Dell delivers an open and integrated approach to datacenter solutions. As part of this approach, Dell’s networking philosophy drives performance that can radically reduce costs by significantly streamlining operations. Force10 solutions provide enterprise performance and resiliency while reducing overall total cost of ownership (TCO), simplifying network deployment, and supporting open, standards-based systems and management solutions. Dell and Force10 have had a successful partnership for more than six years, providing datacenter customers with open, capable and affordable networking solutions.
Dell’s intelligent infrastructure management vision enables orchestration of the underlying server, storage, and network resources in an open fashion, agnostic of whether they are physical or virtual, local or remote, Dell or ecosystem-provided, while ensuring that automated control of those resources is responsive, economical, secure, and resilient.
Force10 was founded in 1999 and is headquartered in San Jose, Calif., with research and development operations based in Silicon Valley. Dell also plans to keep Force10’s existing operations in Chennai, India as it continues to invest in additional engineering and sales capability to grow this business.
The transaction was approved by the board of directors of each company. Additional terms of the transaction were not disclosed. The transaction remains subject to customary conditions and is expected to close in late summer.
Quotes
“Today’s datacenter networks are too complex and require too much manual intervention. What worked in the past is no longer viable in the virtual era,” said Brad Anderson, senior vice president, Enterprise Solutions Group, Dell. “Dell’s approach of offering customers open, capable and affordable solutions aligns with Force10’s approach to offering customers new levels of flexibility, performance, scale and automation which is fundamental to changing the economics of datacenter networking.”
“We are excited to work with Dell. Combining Dell’s global scale, reach and enterprise portfolio with our innovation in high-performance networking provides our customers the best end-to-end solution for today’s and tomorrow’s data centers,” said Henry Wasik, chief executive officer, Force10 Networks.
