Opinion: How Dell got to write a cheque for $1.4B

My office is in downtown Nashua, New Hampshire. To my west is the Nashua River, and beyond that most of the rest of Nashua and a company called EqualLogic. I came to work Tuesday morning thinking I could hear the sound of a party coming from somewhere on the west side of the river. It was 8:30 a.m., and I dismissed the thought. Then I read the news: Dell buys EqualLogic for $1.4B. I had to read the note more than twice. One point four billion dollars. One billion, four hundred million dollars. I let the number sink in, and then went outside to see if the party was still going on. It was.

(Also see "Does EqualLogic buyout mean splitsville for EMC, Dell?") I then remembered that someone had called me a few days earlier asking if I knew whether or not some big company was interested in buying EqualLogic. I said I wasn't aware of anyone courting it, but added that EqualLogic's owners would be crazy to go that route given that they had recently filed IPO papers. My logic was obviously flawed, given the lofty first-day valuations of some other noteworthy storage IPOs like CommVault and Riverbed. IPO was the way to go. Often in error, never in doubt, I say.

Since then, I've talked to some pundits who know more than I do. They think that Dell was chosen the winner because it made the best offer and was willing to pay in cash. That implies there were other bidders, which, in turn, explains how Dell got to be the one writing a check for one billion, four hundred million dollars. And this is where the deal gets even more interesting.

One of the supposed bidders is a big networking company. That makes sense to me because of this presumed bidder's ardent interest in VMware and the fact that EqualLogic has done well, nay exceeding well, by VMware users.

Another supposed bidder is a big storage company. It was in the deal, the story goes, to keep EqualLogic out of the hands of the winner. That I find difficult to believe, but if true, then there's some blood on the floor and a score to settle.

In any case, I find it likely that at least one big company of some kind is still looking for an iSCSI storage company to have and to hold. I can think of at least two iSCSI players that would find one billion, four hundred million good reasons to sell to the highest bidder before going IPO. Let me know if you hear a party going on at some unexpected time of day.

John Webster is the principal IT adviser at research firm Illuminata Inc. He is also the author of numerous articles and white papers on a wide range of topics and is the co-author of Inescapable Data: Harnessing the Power of Convergence (IBM Press, 2005). Webster can be reached at jwebster@illuminata.com.