News

posted on 13 February 2008 09:16

Dell is to buy MessageOne, Inc, a Software-as-a-Service (SaaS) supplier of enterprise-class e-mail business continuity, compliance, archiving and disaster recovery services. This signal's Dell's intention to be a player in the web 2.0/cloud computing market.

The cost is $155 million and a cash purchase has been agreed by both company boards.

Customers use MessageOne’s suite of services to help eliminate the downtime and complexity associated with managing, archiving, e-discovery, and long-term storage of e-mail.

The company plans to make MessageOne offerings available to both direct customers and channel partners.

Dell’s services strategy is focused on providing customers and partners with a configurable SaaS suite of mission-critical capabilities that span primary business functions such as e-mail. Clearly MessageOne’s e-mail business continuity and compliance offerings are pertinent to this aim, and complement recent Dell SaaS acquisitions. The acquisition will also expand on the company’s ProSupport offerings of configurable services announced last week.

Steve Schuckenbrock, president and CIO of Dell Global Services, said: "MessageOne’s offerings add key capabilities to our growing SaaS-enabled services portfolio for the most critical application to businesses of any size – e-mail. MessageOne’s services not only meet the needs of large companies – with an impressive roster of existing Fortune-500 customers and marquee partners as proof points – but can also scale down cost effectively to meet the needs of small and medium business customers.”

There's the rub. It's the massive mid-market and not just enterprises that's the draw for Dell. With the mention of a SaaS portfolio Dell is clearly signalling its intent to be a strong player in the emerging web 2.0 and cloud computing market with, as here, storage-related services being part of it. Obviously Dell needs to have an infrastructure to support the potentially massive storage capacity required and the software needed to read, write and manage the data on it. Whether it will use its own products for this, or indeed, its own datacentres, is unclear.

MessageOne had an infrastructure behind its services and this needs must be integrated with Dell's own.

Dell is now going to compete with other hosted e-mail service providers such as Google, Microsoft and Yahoo!.

A family business
It turns out that MessageOne is a Dell family business. It was co-founded by Adam Dell, Michael Dell’s brother, and is owned in part by two investment funds, Impact Venture Partners and Impact Entrepreneurs Fund, managed by Adam Dell. Michael Dell, Susan Dell, a trust for the Dell’s minor children, and Mr. Dell’s parents are also investors in the Impact funds. Adam Dell also serves as MessageOne’s non-executive chairman of the board.

This had an impact on the acquisition process. Don Carty, Dell CFO and vice chairman, said: “We recognized as we began considering a potential acquisition of MessageOne that related-party interests existed and that this required a series of measures designed to ensure that the transaction was considered, analyzed, negotiated and approved objectively and independently. The process that our Board of Directors put in place provided the high degree of independence and diligence required in this circumstance.”

The Dell board received an opinion from Morgan Stanley & Co. Incorporated to the effect that, as of Feb. 11, 2008 and based upon and subject to the matters stated in its opinion, the consideration to be paid by Dell pursuant to the merger agreement was fair, from a financial point of view, to Dell Inc.

Michael Dell himself was excluded from negotiating acquisition terms and from all aspects of the decision-making process. The independent members of Dell’s board of directors (excluding Michael Dell and Don Carty) explored and analyzed in detail the process by which management identified, proposed, analyzed and negotiated the acquisition to ensure that management was acting independently and in the best interests of Dell Inc. and its shareholders.

It is currently expected that, when the Impact funds distribute the acquisition consideration to their partners, Adam Dell will receive approximately $970,000; Michael Dell, Susan Dell and their children’s trust, collectively, will receive approximately $12 million; and Mr. Dell’s parents will receive approximately $450,000.

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.