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Dell Inc. (DELL) said Thursday it is in exclusive talks to buy data-storage provider Compellent Technologies Inc. (CML) in a deal valued at about $900 million, an 18% discount to the company's recent market value.

A purchase of Compellent would mark the latest merger in the data-storage sector, which has been growing quickly on soaring demand for efficient ways to store and access mounting amounts of documents and media.

Investors have been waiting for Dell's response to losing in September a high-profile bidding war for another data-storage provider, 3Par. Compellent had long been mentioned as a potential target, causing shares to triple since August and eventually leading to the below-market offer.

Dell and Compellent said in a press release that there is no assurance that a deal will be reached. Both parties are working to announce a finalized deal as soon as possible, people close to the transaction said, and further bids aren't expected as Compellent's interest in being bought has been speculated for months.

UBS AG's (UBS) investment banking group is advising Dell in its bid. The firm also advised International Business Machines Corp. (IBM) in its offer for data specialist Netezza Corp. earlier this year.

Notably, Frank Quattrone's investment banking firm Qatalyst Partners isn't involved in the deal, despite previous speculation that the firm was representing Compellent in its quest to sell itself, people close to the transaction said. The veteran investment banker earlier this year shopped around data storage providers 3Par and Isilon Systems Inc. (ISLN), both of which have agreed to be bought.

Qatalyst didn't respond to requests for comment.

Dell spokesman David Frink said acquiring Compellent would be consistent with the company's strategy to build its enterprise solutions portfolio and enhance its storage offerings. He declined to comment further about the potential deal.

A spokesman from Compellent also declined to comment. In October, the company reported a record third quarter and projected fourth-quarter results that topped estimates at the time because of soaring demand for its data-storage technology.

But many analysts expressed doubts about what strategic advantages Dell will gain from the deal, saying Compellent products--though using a different storage networking standard--compete with Dell's EqualLogic line.

"Dell is doing really well with EqualLogic," IDC analyst Benjamin Woo said. "The question is where Compellent fits in. There's a lot of overlap."

Compellent's products typically are sold in the mid-range market. Analysts said Compellent isn't strong in high-end storage--an area where Dell is lacking and that it was hoping to break into with a purchase of 3Par. Dell resells EMC Corp. (EMC) products, but the relationship has been strained of late.

EMC didn't respond to requests for comment.

Dell said that under the merger agreement being discussed, it would pay Compellent $27.50 per share in cash, which is below Compellent's closing price Wednesday of $33.65. People close to the transaction said the amount was agreed upon before the stock's runup this week.

Compellent's shares jumped 17% Tuesday after the company's chief financial officer suddenly canceled an appearance at a tech conference. On Thursday, Compellent shares fell 14% to $29.04, while Dell slipped 3 cents to $13.65.

Hapoalim Securities analyst Kevin Hunt said that while the potential deal is less expensive than other recent storage mergers, Dell is "paying a lot for something that overlaps with what it has.

"Those companies had much more unique solutions in the markets they served," he added. "There weren't really alternatives if you wanted to buy them.

Meanwhile, the news sent down shares of data-storage company CommVault Systems Inc. (CVLT), which also had been mentioned as a target for Dell. The company has repeatedly said it plans to remain independent. Shares slid 2.7% to $30.28.

Demand for data storage has benefited from virtualization and cloud computing, which allows users to access and store data through the Internet instead of on their own hardware. EMC, IBM and Hewlett-Packard Co. (HPQ)--which defeated Dell in the bidding war for 3Par--all have made acquisitions in recent months to bolster their data-storage offerings.

-By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com

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