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Dell in talks to buy Eden Prairie-based Compellent for $876M

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(Bloomberg) -- Dell Inc., the world's third-largest personal-computer maker, is in exclusive talks to buy Eden Prairie-based Compellent Technologies Inc. for about $876 million, a discount to the data-storage maker's current market value.  Compellent sells technology that helps companies store, recover and manage large amounts of data.

Dell would acquire all of the outstanding common stock of Compellent for $27.50 apiece in cash, the companies said today in a statement. That's 18 percent less than yesterday's closing price for Compellent. The stock had almost doubled in the past two months before today on speculation it will get bought.

Dell is using acquisitions to expand its data-center offerings, such as computers servers and storage, and lessen its dependency on the desktop and notebook market, where profit margins typically are lower. 

"They have to beef up their data-center" business, said Abhey Lamba, an analyst at ISI Group, who rates Dell shares "hold." "PCs are a very low-margin, commoditized business."

Compellent fell $4.40, or 13 percent, to $29.25 in New York Stock Exchange composite trading at 9:57 a.m. Round Rock, Texas- based Dell added 5 cents to $13.73 on the Nasdaq Stock Market.

There probably won't be another bidder for Compellent, said New York-based Lamba, since most of Dell's rivals, such as EMC Corp., Hewlett-Packard Co. and International Business Machines Corp., have already acquired or built such assets. Compellent may be able to negotiate a higher price, he said.

Dell and Compellent said there can be no assurances that an acquisition will be completed.

Data Centers

Dell said in June it expects its data-center business -- servers, storage and networking gear -- to generate $30 billion in sales by the end of fiscal 2014, from $17 billion in the year that ends in January. Desktop and personal computers make up more than half of the company's sales.

In September, Dell lost a bidding war for 3Par Inc. to HP, which bought the data-storage maker for $2.35 billion, more than triple the company's market value before any bids became public.

As Dell's data-center business expands, the company plans to increase research and development spending on those products from a single-digit percentage of sales to 10 percent or more, Chief Financial Officer Brian Gladden said in an interview in November.