The deal marks a blockbuster exit for investors in Nashua, N.H.-based EqualLogic, which provides iSCSI storage offerings for virtualization and is reported to be the largest all-cash deal for a VC-backed company. EqualLogic counts among its venture backers Charles River Ventures, with 29.9%, Sigma Partners (29%), TD Capital Ventures (16.1%) and Focus Ventures (9.9%). EqualLogic has raised $52 million in funding since 2001.

Internet SCSI, (Small Computer System Interface), or iSCSI, enables customers to use IP networks to manage storage while simplifying maintenance and reducing costs. There was a boom in iSCSI companies in the telecom bubble days of 1999 and 2000, after which interest faded and IT spending dropped off in the area. Interest revived a few years later. EqualLogic shipped its first product in June 2003 and has since added more than 3,200 customers in 30 countries, a Monday statement said.

"Our customers will be dealing with the largest increase in data we have seen in our history over the next few years," Michael Dell, the Round Rock, Texas, buyer's chairman and chief executive, said in the statement. "Leading the iSCSI revolution will help Dell accelerate IT simplification and virtualization and will drive the Dell value proposition into more areas of the enterprise storage business."

Dell said it plans to incorporate the target's technology into iterations of its own PowerVault storage line.

Both buyer and sellers' boards have approved the deal, which is subject to regulatory approval and customary closing conditions. Dell said it expects the deal to close late in its fiscal fourth quarter 2008 or early in its first quarter 2009.

The deal is expected to dilute the buyer's earnings per share between 2 and 5 cents apiece in fiscal 2009 and 2010.

A Wilmer Cutler Pickering Hale & Dorr LLP team led by David Westenberg advised EqualLogic.

On Aug. 2, analysts had predicted Dell's $340 million buyout of ASAP Software Inc. would likely trigger smaller acquisitions by the struggling computing company.

They said the company is following its rivals by pushing deeper into the services business, which provides higher margins than computers and is in high demand from Dell's corporate buyers.