Dell Divests Its Software Business for Reported $2 Billion

Dell is in the process of selling off its Software Group's security, data analytics, and systems and information management solutions to private equity firm Francisco Partners and hedge fund operator Elliott Management.

Terms of the deal, which was announced Monday, were not disclosed, though Reuters estimates its value to be more than $2 billion.

The divestment includes assets Dell acquired in 2012 when it won a protracted bidding war for Quest Software, which owned a wide portfolio of systems management and migration tools aimed primarily at Microsoft-based environments, including Active Directory, SharePoint and Windows. In addition, Dell is selling SonicWall, a supplier of e-mail and content management security appliances, also acquired by Dell in 2012.

Dell will retain Boomi, the software business that provides integration and connectivity between cloud and on-premises apps, along with API and master data management.

News of the divestment comes as Dell is on the cusp of closing its $67 billion deal to acquire storage EMC, the largest merger in the IT industry to date. While Dell hasn't said why it has decided to sell off its Quest and SonicWall units, they apparently no longer fit into the company's strategy of focusing on hardware (ranging from its PC and devices business) and the datacenter (with its portfolio of servers, networking and the extended storage and datacenter infrastructure assets that will come from EMC).

Likely, Dell could also use the cash to finance the EMC deal. Dell has already shed its consulting business and Perot Systems, and spun off its SecureWorks unit in an initial public offering.

The Quest portfolio consists of advanced analytics, database management, data protection, endpoint systems management, identity and access management, Microsoft platform management, network security, and performance monitoring, according to Francisco Partners.

"We see tremendous growth opportunity for these businesses," said Brian Decker, head of security investing at Francisco Partners, in a statement. "Network security and identity and access management are increasingly strategic imperatives for enterprises."

It isn't clear what the operating structure will be for Quest and SonicWall or what the future holds for Dell Software President John Swainson. Dell said further information will come at the closing of the deal, which is subject to usual regulatory approvals.

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.