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The new Dell research and development facility in Santa Clara, California. The Texas-based tech firm announced that's it's buying Orange County's Quest Software for $2.4 billion.
Texas-based Dell Computer just announced that it's buying Orange County's Quest Software, for a very respectable $2.4 billion, roughly a $422-million premium on what the company was considered to be worth a few months back, when Dell offered $23 a share and kicked off a bidding war that pushed Quest's value to $28 a share.
The consensus view is that Dell is buying future growth. The so-called "enterprise" market is getting hot, as the consumer Web space has become a lot more crowded, both for desktop software and new mobile applications. Businesses have more complex needs, however, and often seek out custom solutions — and they do it often enough to make this a roughly $250-billion market, according to Gartner, an IT advisory company.
Oracle, IBM, and SAP are well-known in this field. But Microsoft is actually the biggest player. Dell, on the other hand, made its name for building PCs to order. And with the advent of smartphones and tablets, that market is fading. It may take a while to completely vanish, but established PC makers are eyeing other lines of business and spending aggressively to acquire them. Dell alone has been buying at a decent clip, spending down $15 billion in cash last year to around $13 billion in the first quarter of this year.
There's a problem in the venture capital world. The amount of venture funding flowing into startups has been reduced by the financial crisis, but VCs are still looking to make money off new technology businesses. Biotech is another story. A mobile application or social networking website can turn to gold far quicker than a biomedical play.
"[Information] technology has faster exits than biomedical," said Dr. Jacob Levin, Assistant Vice Chancellor of Research Development at the UC Irvine Medical Center. "The burden of the FDA approval process isn't there. It can take eight years to get a new technology or treatment approved."
According to Levin, the dreaded "valley of death" — the point at which a startup moves from early stage funding to more serious investment, commercialization, and revenue — for biomedical is "expanding." This is a major challenge in Southern California, where biotech is often viewed as the region's answer to Silicon Valley's tech juggernaut.