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Dell And Compellent Sitting In a Tree

Dell and Compellent are engaged in exclusive negotiations for Dell to acquire Compellent at $27.50 a share, or $876 million. Because the storage business has seen bidding wars for Data Domain and 3Par over the past few years, and Compellent has been not-so-quietly building a state-of-the-art modular array, my friends down on Wall Street have bid Compellent's stock up to $33 a share and are likely to be disappointed. Because I'm a geek, not a trader, I'm more concerned about how this will play out for Dell and Compellent customers.

I've been a fan of Compellent's Storage Center for quite a while. Compellent uses standard x86 servers, with some secret sauce in the form of a cache card, and software as the RAID controllers. Compellent's technology is based on data "chunklets" rather than disk drives, as the unit of both data protection and data movement. On a Compellent system, if you define a 5+1 RAID 5 volume, the system will write five data chunklets and one parity chunklet for each set of data. Those chunklets won't be fixed to a specific set of disks but spread across the available drives as appropriate.

This method means the system can more easily manipulate data chunklets for functions such as snapshots, thin provisioning, deduplication, automated tiering and the like. Compellent's Live Volume feature uses replication and allows a volume to appear on two Storage Centers with a single identity, so you can access it from either array for transparent failover or interdata center failover.

The story behind this acquisition is more than just Compellent's product. While most IT vendors have their share of happy customers, I've yet to talk to an unhappy Compellent customer, including when I had unfettered access to attendees at Compellent's annual C-Drive user conference. While the praise didn't reach the fanboy hysteria of some Apple or Linux gatherings, I was very impressed by the level of satisfaction with Compellent's products and customer interactions.

This isn't Dell's first attempt to buy a storage vendor this year. But for Dell, buying Compellent is different than buying 3Par. 3Par's primary product is an enterprise-scale disk array that 3Par sold directly to large accounts and solution providers. 3Par would have in part helped Dell make the move upscale that it needs to make to continue to compete with HP, IBM and Oracle. However, Compellent provides a modern alternative to the EMC Clariion that Dell's resold for years. Compellent and 3Par may have similar architectures, but most 3Par customers bought their systems with several hundred drives each; customers of 3Par's mid-range F-Class systems also bought the high-end T-Class. Of course, when Dell replaces the SuperMicro servers that Compellent's been using for controllers with Dell servers, Dell will be replacing Clariion with a higher-margin product that keeps customers thinking Dell, not EMC.

This won't help the Dell/EMC relationship any, but that relationship has been on rocky ground for a while. From Dell's buying EqualLogic (and selling fewer Clariion AX systems as a result) to its attempt to buy 3Par, it's clear these two vendors aren't riding off into the sunset together. EMC's embrace of Cisco's Unified Computing System and the Virtual Computing Environment alliance probably didn't go down very well in Round Rock, either.

Like EqualLogic, Compellent sells its product exclusively through reseller channels. With Dell's history as a direct vendor, many resellers have a visceral hatred of Michael Dell and everything he stands for. Before Dell bought EqualLogic, CDW was EqualLogic's biggest reseller, accounting for about a quarter of all sales. Shortly after, CDW stopped selling EqualLogic. Reports I've heard from other resellers say that Dell's been supportive and has kept EqualLogic as a semi-autonomous group, so Dell may be able to retain most of Compellent's reseller force.

If the deal goes through, it makes Dell stronger and leaves just a handful of stand-alone array makers in the market--primarily, Xiotech and Pillar, while Infortrend and Promise try to move up from the cellar into the midmarket.