Posted by: Dave Raffo
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Dell today said it is serious about buying Compellent Technologies for $876 million. I guess it’s really serious if the companies already have a price.
Any storage acquisition under $2 billion seems like a steal these days and Dell has clearly been shopping for another platform to go with its EqualLogic iSCSI family. Still, this proposed deal raises some questions about Dell’s storage strategy:
Is Compellent that much different than EqualLogic? Sure, Compellent sells Fibre Channel SANs and EqualLogic is iSCSI only, but they target similar customers. Buying Compellent won’t give Dell a larger potential customer base than it already has with EqualLogic plus its OEM deal with EMC for Clarrion Fibre Channel SANs. And Compellent isn’t a replacement for the higher end 3PAR arrays that Hewlett-Packard outbid Dell for in September. “How does Compellent, which has been a repeatedly highlighted competitor of Dell/EqualLogic, address Dell’s desire to move into the higher-end storage market?” Stifel, Nicolaus & Co. analyst Aaron Rakers asked in a note issued to clients today.
Is this the end of the Dell-EMC relationship? That long-standing partnership took a hit when Dell bought EqualLogic in 2008 and another when it tried to buy 3PAR. EMC CEO Joe Tucci has talked about rebuilding the relationship, but only if Dell were serious. Buying another EMC competitor probably isn’t what Tucci had in mind as a Dell show of seriousness. You could argue that the higher end Clariion systems still give Dell something that it doesn’t get from Compellent, but does EMC still want to play ball with a company that has become a prime competitor?
One financial analyst said EMC and Dell will retain their uneasy relationship for now. “It’s obvious that the EMC-Dell relationship is getting worse,” said Kaushik Roy of Wedbush Securities. “But what choice does Dell have in the high end of the midrange? Compellent doesn’t go there. So I think Dell still sells some CX in the midrange.”
By tipping its hand on Compellent, is Dell making it more likely that another suitor will make a bid? And if so, who? Rakers raises the question of whether NetApp would be interested, but Compellent’s doesn’t fill any gaps in NetApp’s product line.
On the plus side for Dell, this takes it closer to becoming full-service storage vendor. Dell’s in-house storage portfolio now includes EqualLogic, Exanet’s clustered NAS IP, Ocarina’s data reduction technology, and its DX Object Storage platform. Compellent brings impressive software technologies such as Data Progression automated tiering, Dynamic Capacity thin provisioning, and Live Volume for migrating volumes across arrays. It will be interesting to see if Dell makes a play for its own storage software company, perhaps its backup software OEM partner CommVault.
From a business perspective, Dell will make more money from selling Compellent systems than it makes from EMC Clariion because it owns the products. This is obviously a key reason for Dell broadening its storage portfolio.
If the companies reach an agreement, it will be interesting to hear Dell’s responses to these questions and its plans for this new technology.