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Dell Expands Beyond NT Storage Market

Dell Computer Corp. today announced a definitive agreement to buy start-up ConvergeNet Technologies Inc. (www.convergenet.com) in a move that Dell says extends its storage reach from its Intel server base into the RISC territory of Unix and the critical heterogeneous storage area network (SAN) market.

Terms of the deal have Dell exchanging about 6.9 million shares of Dell common stock for all outstanding shares and options of ConvergeNet. The transaction is valued at about $340 million and is expected to close within 60 days. The boards of directors for both companies have approved the deal.

ConvergeNet is a 130-employee startup in San Jose, Calif., and has raised about $30 million in venture funding since its founding in 1997. The company was to launch its first product, which it labeled a “storage domain management” solution, next month.

Dell positioned the acquisition as a way to become “one of the top three storage vendors in the world” and as a means to broaden the market it addresses with its year-old line of PowerVault storage products. The company cited figures from IT market research firm International Data Corp. (www.idc.com) sizing the new combined market it can address at an estimated $38 billion in 2002.

Dell introduced a complete Windows NT-only storage area network (SAN) earlier this year. The acquisition of ConvergeNet, with employees from Hewlett-Packard Co., Storage Technology Corp. and Sun Microsystems Inc., gives Dell capabilities in heterogeneous SANs.

“The ConvergeNet technology combined with Dell’s efficient, low-cost business model will mean our customers can get leading-edge data-center storage solutions at values unseen before in the industry,” Michael Lambert, senior vice president of Dell’s Enterprise Systems Group, said in a statement.

Dick Watts, president and CEO of ConvergeNet, will become vice president and general manager of Dell’s storage systems division. He will report to Lambert.

IDC research published earlier this year placed Dell seventh in overall disk storage system revenues at nearly $1 billion in sales for 1998. Most of those revenues came from storage for servers running Windows NT or Novell NetWare. Ahead of Dell in disk storage sales were Compaq Computer Corp., IBM Corp., EMC Corp., Sun, HP and Hitachi America Ltd. -- Scott Bekker

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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