Quest Software Offer Raised to $2.32 Billion

--Quest discloses a superior bid from strategic buyer

--New offer values software company at $2.32 billion, up from previous $2.17 billion value

--Private equity group has ability to match or beat increased amount

Quest Software Inc. (QSFT) disclosed a higher, superior takeover offer from its "strategic bidder," elevating the battle for the data-management software maker to $2.32 billion.

Quest said the undisclosed third party--which a person familiar with the matter has said is Dell Inc. (DELL)--boosted its offer to $27.50 a share. The bid has been deemed superior to the $2.17 billion, or $25.75 a share, offered by private-equity shops Insight Venture Partners and Vector Capital.

The Insight team, which includes Chief Executive Vinny Smith, has the opportunity to match or beat the increased amount. Quest said if the new strategic offer remains superior, it would terminate its existing merger agreement with Insight.

The private-equity groups declined to comment. Dell wasn't immediately available to comment, nor was Quest.

Quest shares climbed 5.4% to $27.64 in recent trading, topping the new offer. Dell, meanwhile, slid 1.8% to $11.99.

Quest, of Aliso Viejo, Calif., has faced mounting competition in its traditional specialty--software for managing databases--as vendors such as Oracle Corp. (ORCL) have introduced their own management tools. Quest has responded by trying to diversify its business by acquiring smaller rivals. That has helped grow its revenue but contributed to a drop in its earnings last year.

Meanwhile, Dell has been attempting to remake its business model in the face of soft sales of personal computers. It has attempted to boost both revenue and profits by acquiring higher-margin businesses, including data storage, security and networking technologies. Since 2009, the company has acquired about a dozen companies, but it has been slower to expand its software business.

The fight over Quest echoes a similar battle Dell waged in 2010 for high-end data-storage maker 3Par Inc. Dell eventually bowed out after Hewlett-Packard Co. (HPQ) bid $1.6 billion for the company, which makes rapidly accessible storage drives that allow corporations to run more efficient databases.

Analysts say a merger with Quest would give Dell an immediately bigger footprint in the software market, with opportunities to expand going forward.

"There are some assets Quest has that could provide Dell with synergies on the revenue and expense side," Jefferies analyst Aaron Schwartz said.

Schwartz added he believes the private equity group will match the latest bid, but he said it's unlikely the group will go much higher.

"We thought all along that a potential strategic buyer had more flexibility on the price range relative to a buyout group with financial sponsors involved," Schwartz said, citing bigger cash stockpiles and the ability for a public company to more easily tap the debt market.

Insight originally offered $23 a share in March and later boosted that bid to $25.75, adding fellow private-equity firm Vector Capital to its effort.

(Victoria Stilwell and Drew FitzGerald contributed to this report.)

--Write to Shara Tibken at [e-mail]