Compaq Computer's lower-priced, mid-range storage products helped ease its financial loss during the poor economy in recent months. And this is where EMC hopes to recoup some of its old glory.
The Hopkinton, Mass.-based company plans to push hard into the distribution channel by encouraging about 200 of its partners and resellers to sign up with either Avnet or Arrow North American Computer as a way to target the mid-range market more concisely.
"Compaq is out there selling more on volume and on price," says Gregg Ambulos, vice president of global channel at EMC. "We want to expand our reach into that area ... this is one of the key areas we are focusing on."
EMC's relationships with Avnet and Arrow are not new: it signed on with Avnet in January last year and inked a deal with Arrow in June of last year to distribute its Clariion 4700 storage system. Now, the move is to herd about 200 of its 250 partners and resellers toward working through distributors while the top tier resellers will keep close contact with EMC.
Although partners tend to hate losing that one-to-one relationship with vendors, it makes sense to put more resources into partners that bring in the most money, says Steve McHale, a channel analyst with International Data Corp, based in Toronto, Canada.
"It makes sense to focus on distributors," McHale says.
About 50 of the partners--which include Dell Computer, Unisys, Fujitsu, Kodak, StorNet, Forsythe Technology--will continue to work directly with EMC. The other partners will get equipment and training through distributors. But in an effort to reduce channel conflict with those that do go with distributors, EMC's direct salesforce will not cultivate deals with companies that make $500,000 or less in revenues.
This recent move is one of several changes EMC has made in the last few months as it has seen its profits erode as the economy went south and price wars erupted among the storage vendors. CEO Joseph Tucci has publicly stated his intent to reduce internal costs by making EMC more channel friendly--a major switch for a company known for its hard-charging salespeople.
In the past, about 80 percent of EMC's revenues were from direct sales that helped the company achieve 35 to 50 percent increases in year-over-year quarterly revenues. More recently, the company suffered a $1 billion loss in its third quarter. Another earnings report is scheduled for next week.
According to IDC, Compaq suffered less during the economic downturn. It regained its number one standing in worldwide storage systems revenue, even while its revenues dropped, from $5.3 billion in 2000 to $4.4 billion in 2001. EMC's revenues, however, also dropped, from $5.6 billion to $3.8 billion.
EMC signaled the first step into this area more than two years ago when it purchased Data General for $1.1 billion and acquired Clariion storage products. In October 2001, EMC signed a five-year, multimillion-dollar deal with Dell Computer in which the Clariion storage array will be co-branded "EMC-Dell."