Tech titans are wielding deals to battle for market share. They have been acquiring and partnering, trying to figure out the right business strategy to win customers.
The data center market would make a nice little case study. There is growing demand as server farms that run corporate back offices and the Internet get more data intensive. Dell Inc. (NASDAQ:DELL) is trying to offer customers a choice for products, while Cisco Systems Inc. (NASDAQ:CSCO) wants to be
the choice.
Dell just signed an
OEM agreement to sell Juniper Networks Inc.'s (NASDAQ:JNPR) networking products such as routers and Ethernet switches to various businesses. Some of those products will compete with those under a partnership Dell has with Brocade Communications Systems Inc. (NASDAQ:BRCD). Others have that business model in mind as well. As Reuters
points out, PC maker Dell also competes with Hewlett-Packard Co. (NYSE:HPQ) and IBM Corp. (NYSE:IBM) in selling servers and storage devices to businesses.
Both IBM and HP were challenged by longtime partner Cisco in March. Cisco, the No. 1 networking equipment maker, announced it was
entering the data center market, a move that sparked a bunch of deals in the sector. After Cisco's announcement and a flurry of general tech deals, Juniper -- the No. 2 network equipment maker -- was the subject of takeover speculation, with HP listed as a possible acquirer. It was also proposed that Juniper may acquire another company like Brocade to compete with bigger companies, but Juniper
dispelled those M&A rumors.
Juniper recently reported Street-beating estimates and said it would focus on organic growth. The Dell deal is right in line with that notion. Also, in April, Juniper
touted its data center collaboration with IBM, and just three months ago the two
expanded their partnership, signing an OEM agreement.
Data center deals fly: Equinix, General Atlantic, Ingram Micro
The next couple quarters in the data center sector will be interesting to watch. Will the partner model Dell and IBM use trump Cisco's end-to-end model or visa versa?
While the industry heavyweights battle to grab market share amid growing demand, there are other deals fueling the data center M&A trend we've been tracking. Last week, Equinix Inc. (NASDAQ:EQIX)
agreed to acquire Switch & Data Facilities Co. (NASDAQ:SDXC) for $689 million in a tax-free cash-and-stock deal. On Tuesday, Ingram Micro
Inc. (NYSE:IM), the world's largest distributor of technology products and
supply chain services, expanded its data center capabilities by
acquiring certain assets of Computacenter Distribution.
Private equity is also throwing money into the mix.
As
reported in The Deal Pipeline (subscription required), General Atlantic LLC will pump $150 million of growth equity into data center services company Quality Technology Services.
Overland, Kan.-based QualityTech plans to use the money to expand its data centers and bolster related services to Fortune 500 and midsized companies. The Deal Pipeline notes that QualityTech has seen a rise in inquiries from cash-strapped companies that cannot build out their own data centers. -
Baz HiralalEquinix acquires Switch & Data for $689MEmerson Electric fuels data center deal trendCisco acquires Tidal Software for data center battle
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