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(Reuters) – Dell Inc is in talks to buy Quest Software Inc, the network security software maker that had earlier agreed to be acquired by Insight Venture Partners for $2 billion, Bloomberg reported, quoting sources.

Quest shares were up 5 percent at $26.45 in early trading on Friday on the Nasdaq.

Shares of the company, which now has a market value of $2.12 billion, gained more than a third of their value after Insight Venture’s offer.

Quest said earlier this month it had received multiple alternative proposals during its go-shop period following the offer from the private investment firm.

Dell has been seen by analysts as one of the possible bidders for Quest, whose backup and security software offerings would complement Dell’s product portfolio.

Faced with falling PC sales, Dell has been diversifying its revenue base, 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.

Analysts have also named BMC Software Inc, CA Inc, Microsoft Corp and Oracle Corp as other potential bidders.

Quest has retained Morgan Stanley as its adviser.

The company, whose products include software that monitors the flow of data through networks, is led by Chief Executive Vinny Smith, who took over in February after Doug Garn stepped down citing poor health.

When contacted, a Dell spokesman said the company does not comment on rumors or speculation. Quest Software could not be immediately reached for comment.

Dell shares were up 1 percent at $12.58 on the Nasdaq.

(Reporting by Supantha Mukherjee in Bangalore, Jennifer Saba in New York; Editing by Saumyadeb Chakrabarty)