While terms of the deal weren't disclosed, the move proves Dell is looking to cut deals and grow in businesses tied to IT services and software. Especially acute is Dell's growing threat Hewlett Packard
"There is an opportunity for us that is generated by the turmoil and uncertainty at one of our major competitors," said Chief Executive Michael Dell, in October, of possible acquisitions as HP undergoes big change, according to Bloomberg.
SonicWall is Dell's first sizeable 2012 deal to grow its non-PC business and steal share from larger competitors. San Jose, Calif- based SonicWall, provides tech services that detect and protect networks from malware and other invasive attacks, while also providing data backup and recovery. The company was bought by a private equity consortium for $717 million in 2010.
"We are building a strategic software portfolio to address the needs of our customers," said Dell software group president John Swainson in a press release. "Our customers see security as a key IT concern for the foreseeable future."
"We consider network security one of the most strategic categories within IT today, and view the SonicWall acquisition as a good fit with Dell's product portfolio," wrote Baird analyst Jayson Noland in a note to clients. He gives shares a $20 price target on a "neutral" rating.
The acquisition of a market leading firewall and security leader may also put Dell in competition with new competitors like Check Point Software
That competition could continue to ratchet up in future deals, as Dell targets IT services to offset waning PC sales, which the company expects to fall 7% in the first quarter. In the U.S., PC sales fell nearly 5% in 2011, according to research firm IDC.
Jefferies analyst Peter Misek estimates that Dell paid up to $1.5 billion for SonicWall and noted that the move wouldn't preclude a potential takeover of IT systems specialist Quest Software (QSFT)
Dell shares gained under 1% in Tuesday trading to $17.07 on news of the deal. The company's shares are up nearly 1 year-to-date after gaining over 6% in 2011.