EMC, Dell Deny Alliance Rumors

EMC Corp. (NYSE: EMC) and Dell Computer Corp. (Nasdaq: DELL) fervently deny rumors reported in the Wall Street Journal this week that the two are about to announce a new alliance.

The Journal article is incorrect and has no basis in reality,” said a spokesperson for EMC.

Specifically, the article states that a sales and development relationship between the two firms was “abruptly cancelled” two years ago and that it is about to be renegotiated.

Despite denials by both firms, probing reveals an ambivalent relationship, to say the least. According to EMC, the deal with Dell was never cancelled. EMC says it inherited the OEM relationship with Dell when it acquired Data General back in 1999. That deal continues today: Dell rebadges Data General’s (now EMC’s) Clariion 5700 Fibre Channel RAID storage system as the PowerVault 650F.

Interestingly, EMC no longer sells this product, with company officials saying it is out of date. For its part, Dell has introduced a new version called the 660F that improves on the original model.The disparity between the two versions of the product raises several questions. Dell's having devoted resources to releasing a new version seems to hint at an interest in competing with EMC.

On the other hand, the 660F, introduced in February 2001, is clearly no match for EMC’s high-end Symmetrix systems. Could the computer company be considering reselling EMC’s high-end systems to fill its product gap in this sector?

”We are always looking at ways to improve our storage business,” said a spokesperson for Dell.

Still, there doesn't seem to have been much success. Dell was a major investor in StorageApps, which was acquired recently by Hewlett-Packard Co. (NYSE: HWP) -- see HP Acquires StorageApps. Dell's acquisition of ConvergeNet, a SAN software company it picked up two years ago, produced no products.

Another possible scenario is that EMC might opt to save money by pumping out its Clariion products, the lower end of its storage line, over Dell's Internet sales channels, rather than using EMC's highly trained direct sales force. Indeed, there may be no need for face-to-face direct sales at this level of the market.However, if EMC goes for this approach, it would have to face the possibility of lowering Clariion prices to Dell's cheap and cheerful levels. More questions: What would be the margin impact on EMC? Would EMC be willing to sacrifice its "world class" sales and support image in order to sell more boxes?

Would Dell customers consider paying EMC prices as an alternative? Which company would take on the role of integration and support? Furthermore, could EMC's complicated storage products be transferred to Dell's Web-only support model?

Clearly, questions like these indicate that, at face value, there are plenty of reasons "for" and "against" a deeper alliance between Dell and EMC. So far, neither company seems to have come to grips with the issues. Until they do, the industry is apt to get conflicting messages.

— Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com