Ovum on Dell’s Acquisition of MessageOne
Ovum on Dell’s Acquisition of MessageOne
February 14, 2008: Dell has announced plans to acquire the online email archiving and management services supplier MessageOne in a cash deal for $US 155 million ($AU 171 million), Ovum comments on the acquisition and what it means for the hardware provider.
MessageOne is a privately held company that was founded in 1998 with $US 33 million ($AU 36 million) in venture capital funding. Dell’s bid for the company was met with director approval and is now waiting on regulatory approval and customary closing conditions.
“This move reflects Dell's long-standing ambitions to expand its services business, and underlines the current IT industry confidence there will be strong growth in demand for online services. However, while MessageOne claims to have been growing very fast and will make a very useful addition to Dell's service portfolio, the PC and server giant will face very strong competition in the online services market.” Said Timmothy Stammers, Senior Analyst at Ovum.
Interestingly enough, MessageOne was actually co-founded by Adam Dell, the brother of Dell Computers founder and CEO, Michael Dell. Because of this connection the Dell board of directors took extreme steps to ensure the independence of the transaction, deliberately excluding Michael Dell from all aspects of the negotiation and allowing the board to act independently.
“For Dell, which is struggling to maintain its market share in an ever competitive commodity hardware market, the prospect of carving a slice of a new market is obviously appealing.” Said Stammers.
Dell currently resides at #34 on the Fortune 500 list of companies and is no doubt hoping the acquisition of MessageOne can send it higher still, though as Stammers explains in this particular venture the going is bound to get tough.
“Picking on the largest players, Dell says that HP and IBM do not have a hugely successful track record of selling to the small and mid-sized customers that are likely to be the bulk of the online services market. But IBM and HP leave the SMB market to their reseller channels, and both have reseller channels that are much larger than Dell's. That may be more than enough to make life very difficult for Dell, which has huge brand recognition among SMBs, but little reputation as a services supplier.”