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Dell Inc. has agreed to buy data protection solutions provider Credant Technologies. The financial details of the deal were not disclosed. Credant is a supplier of data protection solutions and helps to control, manage and secure data sent from client devices to servers.

This takeover is expected to help Dell’s computing solutions business by enhancing the reliability, manageability and security of its enterprise computing portfolio. The acquisition is expected to close during the fourth quarter of this fiscal year. This marks the company’s eighth acquisition in a row. The company is making strategic moves to evolve as a full-service technology service provider.

We believe that this acquisition will positively impact Dell. For the past few quarters, Dell’s financial results have failed to impress investors and we believe that the main reason for the disappointment is the delay in the IT renewal process. However, this acquisition would be beneficial for the company, as the company is trying to increase its presence in the data protection solutions segment.

Acquisitions have been a major growth driver for Dell.In order to diversify from the fast-changing and sluggish computing market, Dell has taken strategic decisions to expand its storage and software business.

Thus, Dell’s acquisitions in the past few years were focused on strengthening its position in this area. In July 2012, Dell completed the $2.4 billion purchase of Quest Software. The acquisition forms the backbone of Dell’s software business and helps it better penetrate into the higher-margin enterprise segment. The addition of Quest to the company’s portfolio has enabled Dell to deliver better solutions encompassing server, storage, networking and end-user computing solutions and services.

The company is eyeing more such acquisitions as it looks to bolster its portfolio and increase focus on corporate clients. Through such acquisitions, Dell has always made an effort to improve its technological base.

Dell is making considerable effort to recover its past glory. The company reported decent third quarter results with earnings per share in line with the Zacks Consensus Estimate, but revenue and operating income disappointing.

Although the company is exploring new sources of revenue through acquisitions, it expects a further decline in PC shipments. Moreover, competition faced by the company in the SMB and server segments from players like Hewlett-Packard Company (HPQ - Analyst Report) and Cisco Systems Inc. (CSCO - Analyst Report) is also a concern.

We therefore have a Zacks #3 Rank on Dell shares, implying a Hold recommendation.

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