Dell's Compellent Deal Should Hurt, Not Kill, EMC Relationship

Dell's proposed acquisition of Compellent Technologies should mean that the EMC Clariion relationship, which took a big hit with Dell's acquisition of EqualLogic and suffered another body blow when Dell lost out to Hewlett-Packard in the 3Par bidding war, is pretty much over. Dell is seeking to acquire all outstanding common stock of Compellent for $27.50 per share, a deal valued at more than $800 million.

During the Oct. 19 conference call to discuss its Q3 earnings, EMC executives said the Dell relationship had suffered a setback because of the 3Par move and that the Clariion line was only holding its own, after being hit by Dell moving onto EqualLogic.

Just over two weeks ago, Compellent announced plans to reach out from its SMB base with enterprise-friendly enhancements to its storage management software, such as server virtualization integration. It also announced a new controller platform that supports everything from FCoE to 10Gb iSCSI, and from 6Gbps SAS drives to a 2.5-inch 24-bay enclosure. Compellent also announced the release of Live Volume software, which acts as a storage hypervisor and addresses a number of data mobility issues, including moving storage for application changes, maintenance, planned outages, load balancing and disaster avoidance.

According to a number of analysts, the pending Compellent deal is good news for Dell and bad news for EMC. "I'm a big Compellent fan," says Howard Marks, chief scientist at Networks Are Our Lives. "Storage Center is a good fit for the Dell customer base. It's a step up from EqualLogic in scale up." Since Storage Center is a direct competitor to Clariion, it will not have a positive effect on the EMC relationship, he adds.  "However, Dell sells a reasonable amount of Symmetrix, and Dell will continue to. Despite Compellent's aspirations to enterprise scale, Storage Center isn't Symmetrix or even 3Par scale."

Deni Connor, principal analyst at Storage Strategies NOW, says the Compellent acquisition would allow Dell its own mid-range SAN. "It will also signal a death knell to Dell's relationship with EMC for Clariion storage."The EMC relationship has soured, and Mark Peters, senior analyst at the Enterprise Strategy Group, expects it to continue to fade if the deal goes through. "Dell has been selling mid-range Clariion and high-end Symmetrix from EMC for some time, a relationship that was de facto scarred after Dell's run at 3Par just a few months ago," says Peters. "[If it had won the bidding war,] 3Par would have pretty obviously been Dell's high-end storage system to balance its lower-end EqualLogic products. Compellent is not such a clean fit, inasmuch as one can make overlap cases at both the high and low end for Compellent. Clearly, in line with Compellent's own recent efforts to bulk up on its 'enterprise' features, one would expect Dell [assuming it wins on this bid] to invest further to take Compellent, or at least some variant thereof, 'upmarket.'"

Unlike the bitter bidding wars for both Data Domain and 3Par, analysts agree that Dell should have a clean field for Compellent. With Compellent off the block, there are a number of smaller storage companies that can make sense as acquisition targets.

"The next layer--Xiotech, Nexsan, Pillar, DotHill, for instance--all have attributes and abilities that could help round out one of the big system player's converged stacks," says Peters. "That said, the market is shifting and becoming one focused on scalability, with a strong element of commoditized value (meaning bang for buck, not just low price) so that a range of other new players (such as Coraid, Pivot3, a range of SSD-based entrants and even the lower-targeted players like Drobo) could all come into the picture."

Marks says the remaining attractive players include BlueArc (HDS is the obvious buyer), Xiotech (don't know who the suitor would be) and dedupe specialists Exagrid (could be attractive to Dell) and Sepaton (could be attractive to HP). Dell has yet to offer deduplication or enterprise-size NAS storage, says Connor. Her possible acquisition targets include BlueArc and FalconStor.