Computer maker Dell will purchase EqualLogic Inc. for $1.4 billion (970 million EUR) in cash.
EqualLogic had sales of $68 million (46.9 million EUR) last year and $91 million (62.8 million EUR) in the first nine months of this year, according to regulatory filings.
The company lost $1.9 million (1.3 million EUR) in the first nine months of this year, but earned a profit in the quarter ended Sept. 30, according to filings.
The deal was announced as EqualLogic prepared for an initial public offering.
Dell Inc. said the deal would reduce earnings by 2 to 5 cents per share for fiscal 2009 and 2010. The figure excludes the amortization of intangibles.
EqualLogic's systems use proprietary software designed to simplify how businesses store and manage data. The company says its target customers are medium-sized businesses that can't afford costlier storage area network systems.
Research firm IDC estimates spending on so-called virtualization software and services will exceed $15 billion (10.35 billion EUR) worldwide by 2011, up from $6.5 billion (4.49 billion EUR) last year.
EqualLogic filed for an IPO in August, and company executives planned to begin an investor road show on Tuesday. No date had been set for the stock sale.
Software virtualization company VMware Inc. went public in August in the largest tech IPO since Google's three years earlier.
EqualLogic got seed funding from Charles River Ventures and eventually received more than $50 million (34.5 million EUR) in backing from that and other venture firms.
Christopher Baldwin, a Charles River partner and EqualLogic board member, said Monday's deal was the largest all-cash acquisition of a venture-backed startup. Most purchases include at least some stock as currency.
Dell expressed interest on and off for several years before negotiations became more serious in recent months, Baldwin said.
The starting point on negotiating a sale price was set by the recent IPOs of two other tech companies with similar growth rates and gross profit margins, Riverbed Technology and Data Domain.
"It was a very difficult decision not to go and become a public company," Baldwin said. He said company executives and investors were impressed by Dell's vision to bring plug-and-play ease to data storage systems.
EqualLogic, based in Nashua, New Hampshire, has more than 3,200 customers in 30 countries.
Dell Inc. shares fell 15 cents to $29.90 in afternoon trading.
The deal is expected to close early next year.
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