Dell Can Reach $19 With Enterprise Storage Breakthroughs

by Trefis Team
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DELL
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In an attempt to diversify its business, Dell (NASDAQ:DELL) announced the launch of a $60 million fund aimed at storage startups. It plans to invest anywhere between $3 million and $5 million in around 10 early stage startups focused on enterprise storage. The fund, named Dell Fluid Data Storage Fund, will focus on strategic investments in areas like enterprise storage, cloud storage, memory storage, and next generation storage architectures. [1]

Enterprise storage is gaining importance mainly driven by cloud storage, and Dell is likely to look for opportunities in this field. Storage, servers and networking combined currently account for ~14% of Dell’s value, according to our price estimate, and we expect this to continue to grow in the near future.

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The enterprise storage space is set to grow at a rapid pace due to growing demand for cloud computing and virtualization, and the fund hopes to identify, fund and fuel the “next big thing” in this space. Dell is moving into storage, network security and virtualization, and its ideal target companies are in virtualization, servers and networking, storage, cloud computing, analytics/BI/Big Data, mobility, end- user computing, services and software spaces. Dell expects these investments to align with its Fluid Data architecture with the end game of making storage more affordable and easier to manage.

The focus of this fund is to achieve two objectives: making the broad mid-market storage segment more efficient by bringing high-end features to the market for cheap, and solving enterprise problems at a mid-range price point.

We expect Dell’s storage, servers and networking division will continue to grow as it moves away from its declining PC business.

We have a $19.22 Trefis price estimate for Dell, which is significantly higher than the current market price.

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Notes:
  1. Dell Is Fueling the Next Big Thing in Innovation – Dell Ventures Announces Early Stage Storage Investment Fund, en.community.dell.com, July 17, 2012  []
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