Posted by: Dave Raffo
With sales of EMC storage systems sold through Dell on the decline, EMC CEO Joe Tucci declared last October “there’s a lot more we could and should be doing together” to strengthen the EMC-Dell relationship.
Today, Dell and EMC say they’ve extended their agreement to co-brand Clariion midrange SAN systems to 2013 and added EMC’s Celerra NX4 to the deal. Whether that’s doing “a lot more” or not will depend on how well Dell does with the NX4, which gives Dell another NAS product to sell along with its Windows-based NAS systems. Dell will begin selling the NX4 early next year.
Dell and EMC are calling the new deal a five-year extension, although it’s really a two-year extension because their previous deal was to run through 2011.
“The EMC-Dell relationship has been extremely successful,” says Peter Thayer, director of marketing for EMC’s multi-protocol group. “If you look at the storage industry, you won’t find any relationship as successful as this.”
He’s probably right, considering how many Clariion systems Dell has sold in the seven years since the co-marketing alliance began. But the relationship hasn’t been the same since Dell acquired EqualLogic for $1.4 billion in January, giving it its own midrange SAN system.
EqualLogic’s products are iSCSI only, so Dell still relies on Clariion for Fibre Channel SANs. But it’s probably no coincidence that Dell has sold fewer Clariion systems still picking up EqualLogic. Overall, EMC’s revenues from Dell declined 26% year over year last quarter, and Dell has gone from 15.8% of EMC revenue to 10.4% in a year. Dell accounted for 35% of Clariion revenue a few years back, but less than 30% last quarter.
Wachovia Capital Markets financial analyst Aaron Rakers calls the extension good news because it could end speculation about the two vendors’ commitment to each other. “There have clearly been increased questions surrounding this partnership throughout 2008, or rather since Dell has increasingly focused its attention on driving its EqualLogic business,” he wrote in a note to clients.
Financial analyst Kaushik Roy of Pacific Growth agrees that investors have been concerned about the direction the EMC-Dell relationship is going and the extension should help, but he isn’t sure about how much.
“We will have to wait to see if the relationship bears any fruit,” Roy said of the extension. “While we are not expecting EMC’s revenues from Dell to ramp up materially, investors would be happy if revenues do not decline precipitously.”
EMC is also involved with Dell’s plans to add data deduplication next year. While it hasn’t disclosed any products yet, Dell last month said its dedupe platform will include Quantum software and be compatible with EMC disk libraries.