Take the Dell Bid and Run!

So it's official -- Dell (Nasdaq: DELL  ) really wants to buy Compellent Technologies (NYSE: CML  ) for less than the current market price.

The computing giant did sweeten its bid a little bit, placing the final offer at $27.75 per share. That's 0.9% above the previously reported $27.50 talking point, and Compellent still trades above Dell's purchase price.

At $820 million, net of Compellent's cash balance, this is a fairly large deal. You can pretty much rule out a competing bid from NetApp (Nasdaq: NTAP  ) because its $4.4 billion cash reserve and $1.3 billion in long-term debt don't add up to a strong negotiating position. There are no other mid-range storage specialists available to enter the race, and established industry giants EMC (NYSE: EMC  ) and Hewlett-Packard (NYSE: HPQ  ) are presumably busy integrating their own recent storage acquisitions.

So I don't see any bidding wars erupting over Compellent, no matter how attractive its data management software may be. The storage sector is quickly boiling down to a handful of large bullies named EMC, HP, IBM, and possibly Dell, with all the smaller fish apparently praying for their own turn at the buyout game. Compellent shareholders would be silly to reject this offer, because there ain't no better ones coming.

Other than Dell completing its lineup with Compellent and perhaps a smaller hardware minnow such as Xyratex (Nasdaq: XRTX  ) , I can't imagine the recent buyout fever lingering for much longer. Well, perhaps one of the majors would like to lock up a steady supply of actual drives -- but Seagate Technology (Nasdaq: STX  ) already explored that avenue and came home empty-handed.

So I'm calling an end to the storage buyout binge after this one. Any new deals at this point will officially surprise me.

Do you agree with Anders' buyout cease-fire or do you see more deals coming down the pipeline? Share your insights in the comments below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On December 15, 2010, at 10:52 AM, folowmny wrote:

    There have been several articles that mention XRTX as a potential acquisition target.

    This speculation has gained momentum since the end of November when a small-cap value investment fund sent out a letter to their investors stating they were increasing their stake in XRTX. Reasons behind this move include 1.)An improving business outlook due to higher sales in enterprise-class data storage solutions 2.)Higher than expected results for the fiscal fourth quarter and year which ended November 30, 2010 3.)A buy out bid nearing the end of January between 18.25 and 18.75 per share.

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