Dell Might Keep Turin Alive
It's not as obvious a match for Dell as Force10's Ethernet switches, which were the main motivation behind the acquisition offer, announced Wednesday. (See Dell to Acquire Force10 and Force10 Deal Could Sting Brocade, Juniper.)
Dell has said it plans to support both the carrier and Ethernet pieces of Force10 but hasn't offered any specifics. And it's hard to imagine Dell wanting to deal in the telecom transport gear that came out of Turin Networks, which acquired Force10 in 2009 and adopted its name. (See Force10, Turin Play Convergence Card.)
Still, Shaw Wu, an analyst with Stern Agee & Leach Inc., thinks Dell sees a chance to boost its service-provider business.
"They sell some servers and storage into that area, but it's not that big. This could help," Wu says.
He's not alone. "I think they're going to invest in all aspects of the business," says Brian Marshall, an analyst with Gleacher & Co.
Like Wu, Marshall thinks Dell wants to strengthen its service-provider business, and the company has shown it can handle acquisitions well. "EqualLogic [a 2007 storage acquisition] was a textbook example," he says.
Still, there's skepticism out there. Turin comes with an installed base that's using aging products acquired from Carrier Access Corp. and White Rock that Dell might be loath to support.
"When you look at that company, you're going to see a lot of stale products, and that means a lot of vendor liability," says one industry executive who requested anonymity. "It wouldn't surprise me if it all just disappeared."
But Wu says Turin is pretty small compared with Dell's US$14.5 billion in cash and roughly $60 billion in annual revenues. Turin's revenues were $26.6 million in the six months ended March 2011, according to Force10's S-1 filing, making it about a quarter of Force10's $200 million-a-year business.
"It's not like they bought Cisco Systems Inc. (Nasdaq: CSCO)," Wu says.
— Craig Matsumoto, West Coast Editor, Light Reading