Dell Said to Mull Buying Quest for Computer-Management Tools

Dell Inc. (DELL) is in discussions to acquire Quest Software Inc. (QSFT), a maker of tools that help companies manage their computer systems, according to people with knowledge of the matter.

Dell is among several companies that made offers for Quest Software after it agreed in March to be bought by private-equity and venture-capital firm Insight Venture Partners for about $2 billion, said the people, who asked not to be identified because the discussions are private.

Quest, based in Aliso Viejo, California, makes software that helps companies manage databases and servers, as well as back up information and recover lost data. Dell, the third- largest maker of personal computers, is using deals to help it cater to business customers and lessen its reliance on PCs.

Quest, which had a market value of $2.12 billion at yesterday’s close, also helps customers monitor the performance of applications that run businesses. The stock gained 4.6 percent to $26.33 at 9:35 a.m. in New York. Before today, it had surged 35 percent this year amid speculation that another company would top Insight Venture Partners’ $23-a-share bid.

Dell, based in Round Rock, Texas, has been making purchases -- including five announced this year -- to add software, computer storage and networking gear to its lineup of PCs, which account for 52 percent of its sales.

Photographer: Brent Lewin/Bloomberg

Quest Software makes tools that help companies manage their computer systems. Close

Quest Software makes tools that help companies manage their computer systems.

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Photographer: Brent Lewin/Bloomberg

Quest Software makes tools that help companies manage their computer systems.

Dell’s Stock Slump

Dell on May 22 reported fiscal first-quarter sales fell 4 percent and forecast second-quarter revenue for the period ending in July that missed analysts’ estimates. The shares had their worst performance in more than a decade the following day.

Tracy Benelli, a spokeswoman for Quest, didn’t return messages seeking comment outside regular business hours. David Frink, a spokesman for Dell, declined to comment, as did David Satterfield, a spokesman for Insight Venture Partners.

Quest said earlier this month that it received offers during a so-called “go-shop” period that followed the agreement to be acquired by Insight Venture Partners. Many of the options are “reasonably expected to lead to a superior proposal,” the company said at the time.

Quest had said on March 9 that it agreed to be taken private for $23 a share, in a deal valued at about $2 billion.

JPMorgan Chase & Co. has said Quest is worth about $28, based on the software provider’s sales and cash flow, and could attract bids from International Business Machines Corp., Dell or private-equity firms.

Quest Sales Gains

Quest may report sales rose 11 percent in the second quarter, according to analysts’ estimates compiled by Bloomberg. The company’s revenue rose 13 percent in the first quarter.

Dell shares have declined 19 percent in the past year as an effort by Chief Executive Officer Michael Dell to annex new parts of the computer market has met with uneven results. Sales in the current fiscal year may drop 3 percent to $60.1 billion, according to estimates compiled by Bloomberg.

Dell had $13.7 billion in cash and short-term investments on its balance sheet at the end of the fiscal first quarter.

Quest Software is being advised by New York-based Morgan Stanley. (MS)

To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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