Will Dell Eventually Manufacture EMC Clariion Arrays For Solution Providers?

"We are going to walk before we run, and right now [Dell is building the [CX200 storage array," said Tucci in response to a question on why Dell does not manufacture the entire Clariion line for the channel.

"We are not closing any doors. We continually [review it like any relationship. In any relationship you plant the seeds, grow and you learn from each other. Right now far and away the volume seller by Dell will be the CX200. And they are manufacturing it to control their entire own destiny." EMC is currently manufacturing the CX200 for the rest of its channel.

"The future will be the future as we go down the path," added Tucci. "Nothing is out of the question. Wait until we get there. This is where the volume is, and this is the one that makes sense to do."

Tucci, however, will immediately take advantage of the additional volume discounts that Dell can bring to a deal. The two companies will combine their buying power to get better discounts on Clariion components, Tucci said.

Tucci's comments came in a Monday conference call heralding the first- year anniversary of the Dell-EMC relationship. As part of that anniversary, EMC announced that Dell is manufacturing or assembling the new CX200 storage array under an exclusive licensing agreement with EMC. Furthermore, Tucci added that nothing precludes EMC from selling Dell manufactured product.

Tucci said that one-third of EMC's Clariion revenue comes from Dell, one-third from other EMC solution providers combined and one-third from EMC's direct-sales force. The fastest growing of those segments is Dell, he said. Tucci would not comment on the gross profit margin for each of those channels.

Dell does "not contemplate at this juncture" selling to EMC's other resellers, said Dell President Kevin Rollins. "That is EMC's customer base, not ours," he said.

"We said that at some point in time we thought that manufacturing made sense," added Rollins. "So we are announcing the first of that today. I think as we go through the partnership and find better ways that we can serve our customers and build efficiencies and get benefits, we'll come to you and let you know about it." Dell is assembling the CX200 product in Austin, Limerick and Malaysia.

Under the CX200 licensing agreement with Dell, EMC will recognize the revenue from the deal as a licensing fee. As a result, the CX200 business with Dell will mean higher gross margins for EMC but lower revenue than EMC records on deals with Dell on the higher-end Clariion products.

Tucci would not comment on the price advantage that Dell gets from the CX200 licensing deal vs. the rest of EMC's channel. "Whatever price advantage Dell gets is because of their efficiencies they might or might not [get," he said. "So I don't have a conjecture on the price points from Dell vs. price points on the CX200s we build for our customers."