In February 2011, Dell acquired Compellent Technologies, a pioneer in virtualized storage. Are Dell customers now better off? And are Dell shareholders getting their money's worth? The following are my third-quarter grades for the acquisition.
Strategic importance: A
If Dell shareholders are to get the return they want on their investment, the Compellent acquisition must play an important role in Dell’s strategic direction.
During Dell’s recent Q3 earnings call, Michael Dell led off by saying, "This is a new Dell ... in Q3, our enterprise solutions and service business grew 8% to a record high $4.7 billion, and increased 13%, excluding third-party storage hardware. Enterprise solutions and storage now account for 46% of our gross margin dollars." Additionally, Dell-owned IP storage increased 23%, led by a new EqualLogic solution suite and Compellent Fibre Channel SANs.
Clearly, the reshaping of Dell’s enterprise capabilities is critical to profitable growth, and nine months after the acquisition closed, Dell Compellent remains at the heart of this strategy from a storage perspective. I give Dell Compellent an A for strategic importance.
Dell EqualLogic storage is hugely popular in midsize business for its performance, cost and simplicity. As a result, Dell built its EqualLogic acquisition into a billion-dollar iSCSI storage franchise and market leader. To extend this momentum into larger data centers, Dell needs an enterprise storage architecture designed to win in the emerging cloud era.
I attended the last Dell User Conference, where presentations, demos and signs that generated sloshy sounds when you walked by constantly reminded attendees that the Compellent Fluid Data architecture had become the Dell Fluid Data architecture. It’s easy to see why Dell adopted Compellent’s architecture and branding. Fluid Data captures the disparate technologies--such as storage virtualization, deduplication, thin provisioning and automated tiering--that we can expect to see integrated into a new class of cloud storage from market leaders in the future, so I give the visionary Fluid Data Architecture an A.