Dude! Dell Still Soaring in Storage

Once again, a lot of storage dudes got Dells last quarter.

Dell Computer Corp.s (Nasdaq: DELL) external storage was one of the fastest-growing segments of its overall business in the third quarter. Compared to Dell's total year-over-year revenue growth of 16 percent, storage revenues increased by a whopping 68 percent in the quarter and have nearly tripled over the past two years (see Dell Storage Sales Up 68%).

Dell sells co-branded versions of EMC Corp.'s (NYSE: EMC) midmarket Clariion and high-end Symmetrix disk arrays, and has benefited from that arrangement -- as well as from its server sales and Microsoft Corp.'s (Nasdaq: MSFT) entry into the NAS market.

“Both Symmetrix and Clariion have been receiving very good acceptance in the marketplace, but the bulk of the sales fall into the Clariion product line,” Dell CFO Jim Schneider said on the company’s earnings call Thursday. “And that’s the area that we are going to continue to focus on.”

Storage remains a tiny piece of Dell’s business, but it did take market share from major players on that front. IBM Corp. (NYSE: IBM), Hewlett-Packard Co. (NYSE: HPQ), and Sun Microsystems Inc. (Nasdaq: SUNW) are Dell’s main competitors in the disk array market. Dell also picked up substantial market share in the second quarter, according to market research firm IDC (see IDC: Dell, IBM Lap Up Share).“The size of the market didn’t go up, so Dell’s market share had to go up,” says Arun Taneja of the The Taneja Group. “I’m surprised at the 68 percent growth -- that’s phenomenal. It shows that even in a bad economy, if you have good product and you service the hell out of it, you can sell. They’re hurting everybody in the market.”

Schneider said Dell held firm on pricing of its storage products rather than give in to price pressure to increase sales.

“Our average selling price has held up very well, and it’s exactly what we want to focus on,” he said. “We want to stay away from the deals that just didn’t make any money. We’re really focused on revenues and profitability.”

Dell says it expects to continue its storage momentum in 2004, as it plans to offer new products to capitalize on Microsoft’s Windows Storage Server, which should revitalize the low-end NAS market (see Sands Shift Under NAS Market).

— Dave Raffo, Senior Editor, Byte and Switch