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Check Point, Fortinet Could Be Winners If Dell Taken Private

 February 04, 2013 02:05 PM

(By Mani) PC maker Dell, Inc.(NASDAQ: DELL) is rumored to be taken private by founder Michael Dell, along with Microsoft Corporation (NASDAQ: MSFT) and Silver Lake Partners in the largest leveraged buyout since the global financial crisis.

The buyout group is reportedly discussing a deal to take Dell private for $13 to $14 a share, valuing the company at between $22.6 billion and $24.4 billion, according to Wall Street Journal.

In this scenario, let's see who would be the beneficiaries if Dell is taken private.

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Check Point Software Technologies Ltd.(NASDAQ: CHKP) and Fortinet, Inc.(NASDAQ: FTNT) would be the key winners as these companies could gain share in the Unified Threat Management (UTM) market on the potential acquisition of Dell.

"We believe CHKP and FTNT could be near-term beneficiaries of Dell's potential take-out deal if it does eventually occur," Oppenheimer analyst Shaul Eyal wrote in a note to clients.

In March 2012, Dell bought SonicWall, which competes with Check Point and Fortinet, in the UTM space, and there could be a near-term disruption in Dell's SonicWall business given an integration process that would mean potential displacements by Check Point and Fortinet.

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In 2011, the overall UTM market saw strong growth of 17.4 percent and reached $2.2 billion. Given SonicWall's market share position of 8.1 percent, any business disruption should be a positive for the top two vendors.

Fortinet and Check Point are considered the market leaders with 18 and 13 percent shares, respectively. In 2011, SonicWall was the 4th largest UTM vendor with $181.2 million in revenue according to IDC.

There were similar displacements for both companies on the heels of MAcfee's take-out by Intel Corporation (NASDAQ: INTC) in August 2010.

"It could be déjà vu all over again. On the heels of FTNT's strong 4Q12 results and CHKP's conservative FY13 guidance investors could be viewing our assumption as a feasible one which could result in continued outperformance for both," Eyal added.



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