THE CUTTING EDGE : Dell to Acquire ConvergeNet in $340-Million Stock Deal : Purchase would be part of Dell’s push into market for larger computers used by business.

Dell Computer Corp. agreed to buy closely held data-storage company ConvergeNet Technologies Inc. for about $340 million in stock, in what would be the first acquisition for the leading direct seller of personal computers.

Dell, based in Round Rock, Texas, would pay 6.9 million shares for the San Jose company. Dell said it would take a charge of 5 cents to 7 cents a share for costs of the acquisition, which it expects to close in 60 days.

The proposed purchase is part of Dell’s push into the market for larger computers used by companies to run networks and to store large amounts of data. Data storage sales are expected to reach $37 billion in 2001 from $13 billion this year, according to market research firm Dataquest.

“Storage is going to be huge,” said Dataquest analyst Kimball Brown.

Dell is aiming to be among the three leading data-storage companies, after No. 1 EMC Corp. and No. 2 IBM. EMC has about 35% of the market for storage sales to big companies.

Dell and rival Compaq Computer Corp. are targeting the $10-billion-a-year market for small and mid-size businesses.

EMC last month agreed to buy rival Data General Corp. for about $1.22 billion, in a move to add products for the mid-size market.

Dell does not plan to compete directly with EMC at first, although it may move into that market later, Dell Senior Vice President Michael Lambert said.

ConvergeNet technology enables Dell’s PowerVault storage systems to connect to servers running various operating systems such as Microsoft Corp.’s Windows and Sun Microsystems Inc.’s Solaris. The technology enables disparate computer systems to link and share information.

ConvergeNet has 120 employees, who would stay in California. Dick Watts, ConvergeNet president and chief executive, would become vice president and general manager of Dell’s storage systems division.

Dell has shied away from acquisitions because the company’s direct-sales structure is unlike that of most other computer companies, which sell through distributors.

Dell Chief Financial Officer Tom Meredith said the proposed ConvergeNet acquisition does not signal a change in strategy. However, he said, Dell will continue to look for small transactions that can build its presence in fast-growing markets. “If there are opportunities that present themselves, we are not averse to acquisitions,” he said. The proposed ConvergeNet acquisition will not add to Dell’s earnings until the company begins making new storage systems using ConvergeNet’s technology, he said.

Dell stock fell $1.75 to close at $47.63 on Nasdaq.