Dell shares drop in wake of Compellent purchase deal

Stock falls nearly 4% after $960M acquisition of data storage vendor announced

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It's hard to believe that extra 25 cents a share bothered Wall Street so much, but I don't know how else to explain the battering taken Monday by shares of computer maker Dell.

After announcing last week negotiations to acquire cloud storage vendor Compellent Technologies at a proposed price of $27.50 a share, Dell said early Monday it will go ahead with the purchase, but at a slightly higher price of $27.75 a share.

The deal, which is contingent upon approval by Compellent shareholders, is worth around $960 million (with Dell paying $820 million, net of Compellent's cash). That's up from the approximately $876 million discussed last week, a difference of $84 million.

By the time Monday's final trading bell had rung, shares of Dell (NASDAQ: DELL) were down 53.5 cents, or 3.85 percent, to 13.355. The closing price was barely above the day's low of 13.34.

Compellent shares (NYSE: CML), meanwhile, fell 73 cents, or 2.5 percent, to 27.98. However, Compellent shares had climbed last Wednesday to a 52-week high of $34.16 the day before negotiations with Dell were publicized. The virtualization specialist's stock has more than doubled since mid-April as interest in cloud data-storage technology acquisitions by larger vendors began to heat up.

One analyst quoted by MarketWatch speculated that the Compellent deal could damage its relationship with data-storage vendor EMC Corp.:

“We think the Compellent deal will cause further strain on the EMC relationship,” Wells Fargo analyst Jason Maynard said in a note. “However, Dell still has product holes in the high-end storage and deduplication markets, so we think there is room for Dell to continue to resell EMC VMAX and Data Domain.”

If approved by Compellent shareholders -- and barring a higher bid by a Dell competitor -- the deal is expected to close early next year.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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