Ed Moltzen

The Chart

October 26, 2007

Both EMC, the storage vendor, and Lexmark, the printer company, reported earnings this week. Both are clearly impacted by their relationships with Dell - - but with EMC on the positive side and Lexmark on the negative side.

Dell resells CLARiiON storage systems in a partnership that dates back to 2001. In the past year, Dell has been responsible for about a third of EMC's revenue and has been growing in double digits. Dell is at least holding its own for EMC, if not picking up momentum. David Goulden, EMC's chief financial officer, told analysts during this week's earnings conference call:

. . . Dell represented 15.8% of EMC's total revenue this quarter. Within this total, Dell was around 35% of CLARiiON revenues and the balance came from a broad mix of EMC's information and storage, content management, security and VMware products.

Lexmark hasn't been as lucky as EMC in its Dell partnership. While executives of the printer company have traditionally refused to talk about Dell, in previous SEC filings they have described their Round Rock, Texas-based partner as among its biggest OEM customers. Lexmark CEO Paul Curlander again refused to talk about Dell specifically this week when asked by analysts to explain in more depth why Lexmark's OEM business is under pressure, but Curlander said:

The difficulty with the OEM business is we can't control our customer, that customer makes a decision about where their priorities are, where they want to invest, and where they're going to focus. That's kind of what we're seeing with our OEM partners right now. We clearly have a number of OEM partners, but that's kind of the issue that's causing this to go down. The thing with OEM is you ride it up when everything's in alignment and you ride it down when things are not in alignment.

It doesn't appear as if Dell and Lexmark are in alignment. Lexmark executives said its inkjet business has been declining, will continue to decline, and its OEM inkjet business is leading the way down.