Dell and EMC Do a Deal

Dell Computer Corp. (Nasdaq: DELL) and EMC Corp. (NYSE: EMC) have forged an alliance in which Dell will become the leading reseller of EMC's CLARiiON line of enterprise storage servers (see Dell, EMC Confirm Deal).

The deal comes less than a month after rumors surfaced that the two companies were looking into a new alliance (see EMC, Dell Deny Alliance Rumors).

In a press statement today, the firms characterized the deal as a "five-year, multi-billion dollar strategic alliance to accelerate the growth of both companies' storage systems businesses."

Industry sources already had pegged the alliance as a potentially sound proposition for both parties, because it would enable Dell to enter the storage market in a significant way, while providing EMC access to Dell's sizeable Windows customer base.

The two companies had a former resale agreement through which Dell rebadged Data General's (now EMC's) CLARiiON 5700 Fibre Channel RAID storage system, which is no longer sold by EMC. Dell's other forays into the high-end storage market proved short-lived, including a major investment in StorageApps, which was acquired this summer by Hewlett-Packard Co. (NYSE: HWP) (see HP Acquires StorageApps). Dell's acquisition of SAN software maker ConvergeNet two years ago produced no products.The new agreement with EMC goes beyond just resale. According to the news release, "The companies will collaborate on the definition and explore the joint development of future open, networked storage systems." They'll also look into the possibilities of Dell actually manufacturing CLARiiON products.

Questions remain as to how the deal will work out in practice. Both companies will continue to sell their own storage products, so it's not exactly clear how service and integration will be handled. Analysts wonder, for instance, whether Web support, a highlight of Dell's model, can be used with EMC's complicated products. Pricing is also an issue. And it's not certain how this alliance could change the competitive landscape.

But for now, at least, the message is clear: Dell and EMC have acknowledged their strategic value to each other.

Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com