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Dell buys hosted email company MessageOne

Buys from brother, gives cash to charity

Dell announced yesterday that it is buying MessageOne for about $155m in cash.

MessageOne hosts software to help companies manage, store and recover enterprise-level email. The business was co-founded by Adam Dell, brother of Michael Dell, the founder and CEO of the PC maker.

"We think email is one of the killer applications and MessageOne is a perfect fit for our suite of software services," said Dell spokeswoman Lynn Cranford, who noted that the deal is expected to close in 30 to 45 days.

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Dan Olds, an analyst at Gabriel Consulting Group, agreed that MessageOne's offerings are a good fit for a company looking to extend its range of business services.

"Dell's purchase may signal that they now realise that they can't rely on inexpensive hardware alone to become a player in the enterprise data centre," said Olds.

"Customers are looking for cost-effective solutions. They are less and less interested in buying servers from one vendor, storage from another, software from another and then integrating it themselves. They're looking for vendors that can provide preintegrated solutions that can be installed quickly and with little disruption."

He added that customers are also looking for products that minimize labor requirements.

"Dell needs these type of offerings to be competitive with the IBMs and HPs of the world," Olds said.

Cranford noted that once the deal closes, MessageOne "will be absorbed" into Dell Global Services. The MessageOne hosted services also will be available to Dell's partner channels.

Existing MessageOne customers should not be affected, she added. The same goes for existing MessageOne partners, many of whom provide MessageOne's hosted offerings as resellers.

Cranford said it was "premature" to talk about potential layoffs of MessageOne's 145 employees.

Stephanie Balaouras, an analyst at Forrester Research called MessageOne a "good cornerstone" to support Dell's software-as-a-service (SaaS) strategy. She said the hosted offerings from large systems and storage vendors, such as Dell, EMC, IBM, Seagate Technology and Iron Mountain, may cause corporate customers to re-evaluate their existing physical storage infrastructure investments.

"Anybody who is re-evaluating their backup investments or [email] archiving, or security around disaster recovery, I think you have to consider SaaS as an alternative now," said Balaouras. "With a lot of these large vendors behind these types of services offerings, you'll see a broader swatch of [enterprises] feel more comfortable with SaaS."

Balaouras did caution that Dell must work to overcome two major issues hampering SaaS adoption: concerns surrounding security and customer support.

She said Dell's purchase of MessageOne, coming on the heels of its acquisition of EqualLogic in November, may signal that the manufacturer is looking to build its own storage brand and "outgrow" its reliance on reselling EMC hardware. "It's almost like on numerous fronts, [Dell] is competing with EMC more directly. Clearly, they want to do their own thing," remarked Balaouras.

In a statement, Dell Chief Financial Officer and Vice Chairman Don Carty noted that because Adam Dell and Michael Dell are brothers, there were "related-party interests" that required a series of steps to ensure that the transaction was considered objectively. According to the company, Michael Dell was excluded from negotiating acquisition terms and from all aspects of the decision-making process, and "independent members of Dell's board" analysed the deal to make sure it was in the best interest of the company and its shareholders.

A company statement also noted that Michael and Susan Dell have indicated that the proceeds that they and their children's trust receive from the acquisition will be donated to charity.


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