Dell Agrees To Offload Software Business To Elliott Management, Francisco Partners

Dell will sell its software division to private equity firm Francisco Partners and the private equity arm of activist hedge fund Elliott Management, reportedly for more than $2 billion.

The agreement was announced this morning, and would include almost all of Dell's software assets, including Quest Software and its SonicWall security business. The deal does not include Dell's Boomi cloud integration business.

Reuters has reported that the deal is worth more than $2 billion.

Michael Gray, director of network operations at Thrive Networks, a Tewksbury, Mass.-based Dell partner that works closely with SonicWall, said selling the software business makes sense for Dell, and argued that SonicWall's most successful period was under private equity ownership by Thoma Bravo, which sold the company to Dell in 2012 for about $1.2 billion.

[Related: Dell Channel Chief On Taking Share From HP And The Plan To Unify The Dell And EMC Partner Programs]

"SonicWall's best years were with Thoma Bravo," Gray said. "So, I'm concerned, but I'm fairly positive. Dell has kind of admitted that tucking [SonicWall] under the software group was a little tough because they make hardware. They put a positive spin on it, but that's what it was, a positive spin."

Gray said Thrive has had success as a Dell partner and wouldn't scale back its Dell business as a result of the sale of the software business.

"It doesn't change my perception of Dell as a company," Gray said. "Working with Dell has been really great over the last couple of years, and I wouldn't have gotten this close to Dell if I hadn't been working with SonicWall. I'm not going to turn around and dump Dell because of this."

Francisco partnered with Evergreen Coast Capital, the newly formed private equity arm of Elliott Management, to acquire Dell Software, which is run by President John Swainson.

Activist investor Elliott put significant pressure on EMC to break up its "federation" of companies before agreeing to a truce with it last year and giving its blessing to the Dell merger. Elliott also owns stakes in Symantec, Citrix, Brocade, Riverbed, Juniper, Blue Coat, BMC, Informatica and other tech firms.

Marvin Blough, Dell Software's channel chief, left the company in January and was replaced by former FireEye Channel Chief Steve Pataky. Former SonicWall CEO Matt Medeiros left Dell in early 2015.
Dell did not respond to a request for comment before press time.

The Dell Software sale is the latest Dell has undertaken offset the cost of its more-than $62 billion acquisition of EMC. The company reached an agreement in March to sell its Perot Systems IT services business to Japan-based NTT for more than $3 billion.

The following month, Dell took its SecureWorks security business public in an IPO that raised about $112 million.

Dell is prepared to take on as much as $49.5 billion in debt to make the EMC deal work. The EMC acquisition is expected to close before the end of October.

Meanwhile, EMC shareholders are scheduled to vote on the deal July 19. The company is also waiting for antitrust approval from Chinese regulators.