Sun-Dell Distribution Deal Might Help Vendors, But Hurt VARs

Such a radical pairing is unlikely, however, because the relationship would, among other things, pose competitive trouble for Sun's substantial channel, according to a report from Berstein Investment Research and Management, released this week.

The report suggested that a Sun-Dell distribution partnership, similar to a partnership Dell has with storage vendor EMC, could give both vendors a shot in the arm. Dell manufactures and co-brands midrange EMC storage products, and resells EMC's high-end products.

Bernstein analysts speculated that Dell, Round Rock, Texas, might sell Sun one- to eight-way Opteron systems loaded with Solaris, as well as its own Xeon boxes running Solaris. However, the report stated that there is no reason to believe Sun and Dell are pondering such a partnership.

According to the report, Santa Clara, Calif.-based Sun would benefit from Dell's strength in the commodity x86 server market, a space in which it holds less than 1 percent of market share.

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"Sun needs expanded distribution for both its Opteron servers and to further legitimize Solaris on x86," according to the report. "Dell could provide both."

Dell, which recently lost share in the higher-end x86 server market and in Linux-based offerings, could benefit from sales of Sun's current Opteron family, as well as its upcoming Galaxy line of next-generation Opteron servers, according to the report.

A spokeswoman for Dell said the vendor does not comment on speculation. She added that Dell has been consistently growing its x86 business year-over-year and plans to continue to do so organically.

Even if Sun and Dell were to consider a distribution partnership, the deal would have serious flaws, according to Bernstein.

Sun, which currently derives more than 60 percent of its revenue through partners, could upset solution providers by partnering with Dell, which competes more often than teams with the channel.

Dell's exclusive relationship to sell Intel-based servers also would pose a barrier to such a deal, as Sun is committed to selling hardware running on x86 chips from AMD and has discontinued its own Intel-based server line.

A spokesman from Sun said Sun does not comment on individual analyst reports. Solution providers said it is unlikely Sun would partner with Dell in such a way because the vendor is intent on its strategy to sell its volume systems to the midmarket through the channel.

Ed Partenope, vice president of operations for Sun VAR partner, Innovative Systems Design, Edison, N.J., said Sun is "very committed" to selling its x86 servers through solution providers.

"They're looking for partners to pick up specific volumes," he said. "It's a different model than they've had in the past."

Indeed, Bill Cate, U.S. iForce Program director at Sun, said Sun aims to recruit at least 200 partners to drive volume systems through the midmarket by the end of the year. It already has signed up 50 midmarket partners through distributor Tech Data's TechSelect program.

Sun is so intent on making its volume channel strategy work it has created a founders' board composed of solution providers that play in the midmarket, Cate said. The board's goal is to help Sun build channel programs aimed at selling midmarket solutions around Sun's Opteron-based server line.

"The new founders' board is helping us establish what these programs will look like," Cate said. "Left to our own devices, we'd mess it up."

Another reason the deal seems unlikely is that Dell does not have its own storage products, so partnering with EMC makes more sense than teaming with a vendor that offers competitive technology to one of Dell's own successful product lines.