Dell Acquires Make Technologies, Lays Emphasis On Service

Dell (NASDAQ:DELL) has acquired Make Technologies, its third acquisition last week alone. Make Technologies is a software modernization company which competes in the same space as Clerity, a previous acquisition by Dell. The terms of the deal with Make are, however, not disclosed. ^[1]

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Dell Adopts A Carpet Roll Strategy

The quickest way to consolidate a fragmented market is to acquire the major players and integrate them into one single entity. This has many advantages, particularly in terms of expanding market share and pricing power. Another added advantage is that it lets the acquiring company control most of the patents in the field, essentially neutralizing patent trolling.

If we study Dell’s recent set of acquisitions, it is clear that it plans to become a top end-to-end service provider in the field of modernizing legacy applications. Around 100 employees of Make Technologies will be absorbed by Dell in its services department. Services revenue contributes 20% of our near $26 price estimate for Dell.

More M&A Activity Expected

Dell may most likely continue with its acquisition spree in areas such as software modernization, thin client desktop virtualization, networking & network security and data protection. By offering clients to move away from traditional computing to a cloud-based system, it can reduce costs for its clients.

This also opens up an opportunity to cross sell products from its other businesses such as servers, networking and storage. By coupling hardware, software and services, Dell aims to become a one-stop shop for IT cost reduction, which will put it in direct competition with players such as IBM (NYSE:IBM),  HP (NYSE:HPQ), Cisco (NASDAQ:CSCO) and Juniper Networks (NYSE:JNPR).

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Dell announces intent to acquire Make Technologies, Dell Content Page [↩]