Dell To Buy Storage Networking Company7:46 PM EST Thu. Sep. 09, 1999
Underscoring the importance of storage to its future, Dell Computer Corp. on Wednesday signalled its first corporate acquisition when it said it would purchase storage networking company ConvergeNet Technologies Inc.
The acquisition will enable Dell to expand its storage sales beyond Dell environments into heterogeneous environments, said Michael Lambert, senior vice president of Dell's Enterprise Systems Group, based here.
In the future, customers will be able to buy a Dell storage system and connect it to any server, Lambert said. It will enable Dell to connect to Intel Corp.-based or any RISC-based servers, regardless of the operating system, he said.
"Customers will be able to easily monitor and assign storage capacity to any server on the SAN [storage area network], or on multiple SANs," said Lambert.
San Jose, Calif.-based ConvergeNet is not only important to Dell's storage plans, it is important for Dell as a company, said Lambert.
"We realize we need to broaden [our direct] strategy into a heterogeneous system environment," he said. "The ConvergeNet acquisition lets us do that. What this means is that our sales force will be free to sell our Dell storage network solutions into non-Dell environments."
However, not everyone agrees that Dell's move into heterogeneous environments will be so easy.
Customers are either committed to a single platform, looking for the cheapest solution, or looking for the solution that makes sense, said Carl Wolfston, director of Headlands Associates, a Pleasanton, Calif.-based storage VAR. "We go after the third type," he said. "To get at that customer, sooner or later Dell has to get into the face-to-face selling that it hasn't done before. Dell does a wonderful job with servers and desktops. But when you get into heavy-duty stuff and one-offs, you can't do it that way. Someone has to get on the customer's site."
Whether or not face-to-face contact is essential depends on the application, said Nick Allen, vice president and research director at research firm GartnerGroup Inc., Stamford, Conn. "I think it's going to be a fundamental issue for [Dell]," Allen said. "It might foster a need for Dell to work with resellers."
While ConvergeNet has yet to release any products, the company offers Dell a unique technology for sharing storage on a SAN with existing equipment, said Allen.
However, he said, there is a deeper issue involved in the acquisition. "Compaq [Computer Corp.] has a pretty good R&D effort in SAN exploitation," said Allen. "I think Dell looked at that and felt if it doesn't have its own R&D, it can't succeed in the storage or even server space. Dell bought an R&D arm."
Under terms of the acquisition, Dell will trade about 6.9 million shares of its common stock, worth about $340 million, for all outstanding shares and options of privately held ConvergeNet.
Once the acquisition is complete, Dick Watts, president and chief executive of ConvergeNet, will become vice president and general manager of Dell's storage systems division, which will include both Dell and ConvergeNet's storage teams, Dell executives said.