Dell Said Close to Acquiring Quest for Computer Management

Dell Inc. is in advanced discussions to acquire Quest Software Inc., a maker of tools that help companies manage their computer systems, according to a person with knowledge of the matter.

An agreement could be announced as soon as this weekend, said the unnamed source.

Quest, which agreed in March to be bought by private-equity firm Insight Venture Partners for about $2 billion, has said it received other offers. The company makes software to help businesses manage databases and servers, as well as back up information and recover lost data. Dell, the third-largest maker of personal computers, is using deals to help it cater to corporate customers and lessen its reliance on PCs.

Quest, which has a market value of about $2.12 billion, also helps customers monitor the performance of applications that run businesses. The stock lost 0.1 percent to $25.15 at the close in New York. Before today, it had surged 35 percent this year amid speculation that another buyer would top Insight’s $23-a-share bid.

Dell, based in Round Rock, Texas, has been making purchases - including five announced this year - to add software, computer storage and networking gear to its lineup of PCs, which account for 52 percent of its sales.

Dell on May 22 reported fiscal first-quarter sales fell four percent and forecast second-quarter revenue for the period ending in July that missed analysts’ estimates. The shares had their worst performance in more than a decade the following day.

Tracy Benelli, a spokeswoman for Quest, didn’t return messages seeking comment. David Frink, a spokesman for Dell, declined to comment, as did David Satterfield, a spokesman for Insight Venture Partners.

Quest said on March 9 that it agreed to be taken private by Insight. Two months later, the Aliso Viejo, California-based company said it received several other offers during a so-called “go-shop” period that are “reasonably expected to lead to a superior proposal.”

JPMorgan Chase & Co. has said Quest is worth about $28 a share, based on the software provider’s sales and cash flow, and could attract bids from International Business Machines Corp., Dell or private-equity firms.

Quest's May report sales rose 11 percent in the second quarter, according to analysts’ estimates compiled by Bloomberg. The company’s revenue rose 13 percent in the first quarter.

Dell shares have declined 19 percent in the past year as an effort by Chief Executive Officer Michael Dell to annex new parts of the computer market has met with uneven results. Sales in the current fiscal year may drop 3 percent to $60.1 billion, according to estimates compiled by Bloomberg.

Dell had $13.7 billion in cash and short-term investments on its balance sheet at the end of the fiscal first quarter.

Quest Software is being advised by New York-based Morgan Stanley.