In some ways, computer systems specialist Dell (Nasdaq: DELL) is the complete antithesis to networking guru Cisco Systems (Nasdaq: CSCO). In others, they are absolute soul mates.
As Cisco moves from the pure networking market into a seller of top-to-bottom solutions from the data center, Dell make moves in exactly the opposite direction. With today's purchase of storage expert 3PAR (NYSE: PAR), I wouldn't be surprised at all to see the next big buy out of Round Rock being a networking outfit. And so Cisco and Dell move ever closer together in their quest to emulate existing sell-it-all operators Hewlett-Packard (NYSE: HPQ) and IBM (NYSE: IBM).
Why would networking be the next logical step for Dell? First, 3PAR's expertise lies in making the most of storage systems for virtual computing and cloud-computing environments. What's missing from Dell's picture would be the network that glues its servers and storage units together.
Second, everybody else is doing it, so why can't Dell? HP bought 3Com last year, we already talked about Cisco's convergence moves, and the entire industry is boiling down to a handful of key competitors at a brisk rate. Doing business across the board seems to be the mating call of the season.
If $1.15 billion isn't too much to pay for a virtualized storage specialist whose enterprise value was $500 million last night, then maybe Dell can cough up the cash to grab Brocade Communications Systems (Nasdaq: BRCD). Dell still has nearly $10 billion of cash left after the 3PAR deal (and $4.7 billion of debt, natch), and should be able to cover the cost of Brocade's quite reasonable $2.9 billion enterprise value. Just don't expect another 85% price premium in that deal.
Is Dell doing the right thing here or should the company forget about ancillary services and just focus on selling computers? Or maybe Cisco should just buy Dell and complete the circle of life. Discuss in the comments below.
