Dell Sets Its Storage Stake

Will the EqualLogic acquisition muddy the Dell/EMC waters?

November 6, 2007

2 Min Read
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Dell's decision to throw down $1.4 billion for EqualLogic today is about much more than just the growth of iSCSI and the untapped spending power SMBs. The deal represents the first tentative shot across the bows of EMC.

Unlike EMC, which has always been synonymous with storage, Dell sits astride a varied portfolio of technologies, encompassing notebooks, printers, and even TVs. But this is starting to change.

Recent months have seen Dell attempt to rebrand itself as a storage player, a move which has received something of a mixed response.

The EqualLogic deal is nonetheless a clear indication that Dell is serious about its storage intentions, spending big bucks on a firm, that like itself, is keen to pry open SMB wallets.

"The die is cast, Dell is now starting to build an independent presence in storage," wrote Goldman Sachs analyst Laura Conigliaro, in a note released earlier today, highlighting the sheer size of today's deal as evidence of Dell's storage convictions.What is less apparent is the nature of Dell's ongoing relationship with EMC, from whom it resells storage kit. This partnership has become a major cash cow over recent years and Dell now accounts for between 15 percent and 16 percent of EMC's overall revenues, according to Goldman Sachs.

Dell's decision to look to EqualLogic for its core iSCSI and thin provisioning technology proves that the vendor is more than ready to stand on its own storage feet, prompting speculation that today's deal will muddy the waters of the EMC partnership.

Goldman Sachs's Conigliaro does not expect EqualLogic to have an immediate impact on the partnership, although the analyst firm, in a separate note today, changed its EMC rating from "buy" to "neutral," partly as a result of today's deal.

The initial noises from Dell are placatory. CEO Michael Dell promised to maintain the vendor's "strong partnership" with EMC in press interviews today, highlighting EqualLogic's existing technology partnership with EMC spin-off VMware.

The reality of this situation as it develops over the coming months may be somewhat different. Although hardly on a par with EMC, Dell is clearly on a tear to boost the fastest growing part of its business, and it can be expected to start making a lot more noise about its storage offerings.Is EMC really ready for another gorilla lumbering around the storage jungle?Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.

  • Dell Inc. (Nasdaq: DELL)

  • EMC Corp. (NYSE: EMC)

  • EqualLogic Inc.

  • Goldman Sachs & Co.

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