Dell Set To Close $1.4 Billion EqualLogic Acquisition


The biggest test yet of Dell's commitment to the channel could come as early as Monday as the vendor is expected by several industry sources to announce it has closed its acquisition of EqualLogic.

Furthermore, a source close to Dell said the vendor is expected to adopt certain parts of EqualLogic's channel program when Dell unveils and launches its enterprise architecture certification program on Monday.

Dell early November said it plans to acquire EqualLogic in a deal worth $1.4 billion. For Dell, EqualLogic is an opportunity to grab one of the top vendors in the red-hot iSCSI market while laying the groundwork for a channel based on EqualLogic's channel-only sales model.

As part of that enterprise architecture certification program, Dell said on Friday it will lower the bar for deal registration by letting deals as low as $50,000 be registered, down from the $75,000 bar it had previously announced.

One solution provider, who asked to remain anonymous, said that lower figure is still not enough for EqualLogic partners who are used to being able to register a deal with no minimum dollar value.

EqualLogic spokespeople referred specific questions about the closing of the acquisition and parts of the channel program to Dell. A Dell source merely said that many issues related to the channel program will be addressed Monday.

Solution providers are nearly unanimous in their belief that how Dell deals with its EqualLogic acquisition is key to its success as a channel player.

Aside from those solution providers who have already signed up as Dell VARs who look forward to EqualLogic being a part of the Dell offering, and those who want nothing to do with Dell, the majority of channel partners are for now in a wait-and-see mode, and could swing either way, depending on how the acquisition works.

Dave Hiechel, president and CEO of Eagle Software, a Salina, Kansas-based EqualLogic solution provider, said it's business as usual for now, but he is keeping his options open. "Nothing has raised any red flags yet," Hiechel said.

Ever since the acquisition was announced, Eagle Software has been working with the same core people at EqualLogic, Hiechel said. "So there've been no big changes," he said. "There's a deal registration program in place, and Dell reps get channel-neutral compensation."

Eagle Software is planning about 26 end-user marketing events in 2008 including seminars and lunches, and EqualLogic along with CommVault Systems, Oceanport, N.J., and Spectra Logic, Boulder, Colo., will be core products at those events, Hiechel said.

"We'll let Dell trip themselves up before we make any changes [in our relationship]," he said. "The powers-that-be at EqualLogic have put in procedures to make this work."

NEXT: A CDW Freeze Out?Bernard Westwood, CFO at Syscom Technologies, an Atlanta-based solution provider, said his company has met with people from both Dell and EqualLogic, and realizes that they are still working out the details of the channel program.

"We really need to know the rules and processes," Westwood said. "We're more clear with EqualLogic. But we need to see how the channel side stands up to Dell's direct guys."

EqualLogic has run a clean channel with only a few distractions, Westwood said. "But not many," he said. "I fear there might be a lot of distractions with Dell."

To hope things won't change as EqualLogic becomes part of Dell is naive, Westwood said. "We're looking for as few distractions as possible," he said. "But we know things will change. We just don't want to spend time arguing about who gets the leads, or whether we get the deal registration or not."

Some solution providers have said privately that they are closing out their EqualLogic sales pipeline and looking to replace the vendor with competitive offerings from the likes of FalconStor, Hifn and Left Hand Networks.

"We are dumping EqualLogic," said one EqualLogic partner. "We have no interest in doing business with Dell whatsoever. By the end of February we are closing out the EqualLogic sales pipeline and picking a new partner."

EqualLogic's largest channel partner, CDW, accounted for about $12.74 million in sales for the nine months ended Sept. 30, according to an S-1 document filed with the Securities and Exchange Commission.

Several sources claim that EqualLogic sales reps working on site at CDW are for all practical purposes being frozen out of deals.

CDW won't comment on the status of the Dell EqualLogic relationship. But EqualLogic vice president of marketing John Joseph said the EqualLogic reps are still on site and working with the solution provider to close deals. In fact, he says, the CDW business has not fallen off since the deal was announced last year. "The business relationship continues with CDW," he said. "We're still working out the long term strategy between the two companies."

Joseph said sales through CDW in January had gone "surprisingly well." What's more, he said, EqualLogic had a record fourth quarter with 594 new customers added to its installed base.

Joseph also pledged that EqualLogic partners will find the channel program at Dell just as "lucrative" as it was with EqualLogic. He characterized the Dell acquisition as a "great opportunity" given the computer giant's impressive brand recognition. "Why wouldn't EqualLogic win by leveraging Dell's fantastic brand in the market," he exclaimed. "This is a great thing."

Joseph said there is a wealth of opportunity for both channel partners and Dell direct given that 8.4 million businesses are looking to buy storage solutions. "There is so much opportunity it is beyond comprehension," he said. "We are putting together a program with a level playing field for everyone involved."

RELATED: CDW Not Onboard With Dell-EqualLogic

--With additional reporting by Scott Campbell