DELL Dell Inc. (MM)

Dell Inc. (DELL) recently announced that it has acquired Portland-based virtualization software startup, RNA Networks Inc. The news of the acquisition was also disclosed by RNA on its website. The news has also been confirmed by Dell Inc.’s official spokesperson Jess Blackburn.

The acquisition is expected to further enhance Dell’s Software Services portfolio, with special emphasis on the memory virtualization technology, as RNA networks has the requisite expertise in this segment. However, Dell did not provide any detail on the terms of the deal or how Dell will incorporate RNA's technology into its products.

We believe RNA grabbed Dell’s attention through its RNA software, which creates a pool of shared global memory from a main memory in each server placed across various geographical regions that can be accessed like a cache by all the other devices in a cluster.

Moreover, the software combines multiple servers and takes clue from each of the processors and memory to create a single virtual image, which enables multiple applications to open on the same platform, substituting the work of an expensive SMP and NUMA server.

This is a useful technology and Dell has been able to recognize the potential of the same. Moreover, with this acquisition Dell will gain access RNA’s existing customers.

Dell has an uncanny ability of locating potential companies for acquisition, which further adds value to its existing product portfolio. Recently, in February 2011, the company completed the acquisition of storage-solution provider Compellent Technologies Inc. Dell expects this acquisition to be accretive to pro forma earnings in fiscal 2012.

This acquisition is expected to facilitate automated data transfer and management, tiering and thin provisioning. The enhanced storage platform will attract new users. Moreover, Dell will also have access to Compellent’s existing customer base and channel partners.

Additionally, we believe that the expansion of the company’s enterprise mix and continued demand for DELL’s branded storage and services augur well for the company. A ramp in product line up based on Compellent technology will help the company deliver better margins going forward.

As per a recent study by the research firm IDC, Hewlett-Packard Company (HPQ) was the leader in the PC market in the first quarter, with 18.9% market share, closely followed by Dell (12.8%) and Acer (11.2%). Dell’s market share inched up from 12.7% in the fourth quarter of 2011 to 12.8% in the reported quarter.

This apart, lower component costs and decent pricing in the PC market helped the company maintain decent margins in the quarter. Moreover, a better product mix also aided margin expansion.

Dell reported decent first quarter results, with earnings per share (EPS) surpassing the year-ago quarter results.  New products, strong services business opportunities in the Electronic Medical Record sector, along with the introduction of Dell Streak were the achievements of the company in the recent past.

Moreover, the company is also deriving benefit from the higher mix of commercial business. Dell also benefited from the expanded customer base arising from the Perot acquisition. However, stiff competition from Hewlett-Packardand Acer concern us.

Dell holds a Zacks #3 Rank, implying a short-term Hold rating.

 
DELL INC (DELL): Free Stock Analysis Report
 
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
 
Zacks Investment Research