Dell is to buy Quest Software for $2.4 billion in cash in an effort to expand its software business and decrease its dependence on the declining personal computer market.

The company said today it will pay $28 per share, trumping a bid from private investment firm Insight Ventures, adding that it expects the deal to close in the third quarter.

Dell sparked a bidding war in June, when it offered $25.50 per share for Quest, an enterprise management software maker, topping Insight's initial offer in March of $23 per share. Insight later bid $25.75 a share for Quest.

Last week, Quest said a strategic bidder it did not identify had offered $27.50 per share. Reuters later identified Dell as the bidder.

"The addition of Quest will enable Dell to deliver more competitive server, storage, networking and end user computing solutions and services to customers," said John Swainson, president of Dell Software Group.

Dell has been diversifying its revenue base in the face of weakened consumer demand, giving up low-margin sales to consumers and moving into higher-margin areas, such as catering to the technology needs of small and medium businesses in the public sector and the healthcare industry.

The company now finds itself lagging larger rivals like Hewlett-Packard and IBM in the race to become one-stop shops for corporate information technology needs.

Dell dropped 1.4 per cent to $12.34 in early trading. Quest, up 43 per cent since Insight first made its offer, was down 0.2 per cent.

Reuters