Dell Deepens its Commitment to SMBs with Acquisition of SonicWALL

BROADENS RANGE OF OFFERINGS AND INCREASES NUMBER OF SMB CHANNEL PARTNERS

On March 13th, 2012, Dell announced the acquisition of SonicWALL, a leader in Unified Threat Management (UTM), further broadening its portfolio of security offerings, especially for SMBs and branch offices. By acquiring SonicWALL, Dell gains on multiple fronts.

• Broaden its Portfolio of Products and Services for SMBs. While SonicWALL has added enterprise-level offerings in recent years, for a long time it was known primarily as SMB-focused company and one of the leaders in UTM for SMBs. Known primarily for its security appliances, it offers SMBs gateway security to protect their networks as well as web and email security, secure remote access and continuous data protection (secured at remote locations). Most of these offerings would supplement Dell’s existing products and enable SMBs to purchase more of their products from a single source.

• Expand its Channel Partner Base. SonicWALL sold almost all of its products through a loyal base of channel partners, who benefitted not only by selling SonicWALL appliances but also earning ongoing service revenues from managing those appliances as well as off-site continuous data protection (CDP). In that respect, SonicWALL was a step ahead of the industry in offering remote services and would fit in well with Dell’s cloud ambitions. While there may be some overlap between the channel partners of the two companies, and Dell may not grandfather all of SonicWALL’s partners to resell Dell products, Dell would still significantly increase the number of its channel partners (including many MSPs) and broaden its footprint in the SMB market.

• Enter a Fast Growing and More Profitable Area. SonicWALL accounts for less than one-half of one percent of Dell’s revenues but it is growing much faster. While Dell’s revenues, including revenues from various acquisitions, have essentially remained stagnant over the last five years, SonicWALL has grown by almost 30% during the same period. Its net profitability is 2-3 times higher than Dell. By selling SonicWALL’s products to its current customer base, both directly, through Dell Services and through Dell’s PartnerDirect members, this profitability will increase further as selling through Dell will help reduce SonicWALL’s sales and marketing expenses (which account for 35-40% of its total revenues)

Dell has acquired several companies in recent years that had developed products primarily for SMB customers. After acquiring them, Dell has not only increased their sales to SMBs but, in many cases, also sold those products to branches of its large customers. If Dell follows the same strategy for SonicWALL’s offerings, its latest acquisition will be a win-win situation for Dell, SonicWALL, their customers and Dell’s investors.
Anil Miglani