With Dell accounting for greater and greater percentages of revenue for storage vendor EMC, the Hopkinton, Mass.-based company says Dell now is responsible for more than 10 percent of its accounts receivable.
EMC, which last year extended its relationship with Dell to 2011, reported its total accounts and notes receivable at the end of its last quarter stood at $1.7 billion, putting Dell's tab at $172 million. An EMC spokesman said that accounting rules strongly suggest a company report when one entity holds 10 percent or more of its accounts receivable -- a threshold Dell crossed by the end of the storage company's 2006 fiscal year.
Dell fell just shy of the 10 percent threshold a year ago, the EMC spokesman said.
EMC was the leading storage vendor with a 25.5 percent share of the $3.7 billion worldwide external disk storage market in the third quarter of 2006, according to analyst firm Gartner. Dell, the fifth-largest vendor with a 7.3 percent share, sources the lion's share of its storage products from EMC.
The only surprise about that figure is that it was not higher, EMC solution providers said.
EMC often talks about Dell accounting for 20 percent of revenue, said Dave Klauser, area director of sales for the northern United States for Insight Investments, an Irvine, Calif.-based solution provider. "Based on conversations with EMC executives, I thought it would be higher," Klauser said.
For many of EMC's solution providers, the vendor's relationship with Dell is not an issue.
EMC is doing a good job of working with the channel, Klauser said.
"If a partner brings a deal to EMC, EMC will do everything they can do to help the partner, including taking a loss," he said. "But even so, Dell might still take a loss to get the deal. But we're protected if we register the deal."
As an EMC solution provider, Klauser said he does not fear Dell one bit. "If I uncover an opportunity before Dell, I can get the deal with my service and my value-add," he said. "All Dell can offer is low prices."
Dan Carson, vice president of marketing and business development at Open Systems Solutions, a Willow Grove, Penn.-based solution provider, said that he is actually starting to feel that EMC's relationship with Dell is changing.
"They have a love-hate relationship," Carson said. "EMC loves the Dell revenue, but not the way Dell cannibalizes the relationship. Dell sets the street price for EMC storage, and a lot of the time it's low because Dell needs to sell servers. Often, storage is a loss-leader for Dell to increase server sales. I may not see the price, but customers often come to me and say Dell is significantly lower than me, even when I have no margin."
Carson disagreed with Klauser in one area. "EMC never takes a loss," Carson said. "They will provide incentives when we register a deal before Dell. But sometimes it's not enough."
Klauser said that Dell's policies to customers is starting to impact the company and its personnel.
For instance, Klauser said he just hired a former Dell sales rep who was in the top 1 percent of enterprise sales reps for the company. That rep, Klauser said, had eight years of experience with Dell, but wanted to get away from the pressures of Wall Street and pressures from the company to push customers to make bulk purchases of PCs and servers where no value-add was possible.
"The rep has a significant number of relationships," Klauser said. "But the bulk sales pressure of Wall Street was starting to erode relationships with the customers."
In its annual 10-K report filed Wednesday with the U.S. Securities and Exchange Commission, EMC spelled out how much more of its total business Dell had grown to through the end of last year.
"For 2006 and 2005, Dell, Inc. accounted for 14.5 percent and 11.6 percent, respectively, of our total revenues," EMC said in its annual 10-K filing with the SEC, posted Wednesday. "Dell, Inc. also accounted for 10.2 percent of our accounts receivable at December 31, 2006." According to its own financial records, Dell's days in accounts payable stands at 78 days.
Under terms of their agreement, Dell has essentially become a reseller of EMC's Clariion storage systems.
Despite Dell's hefty numbers, the EMC spokesman said value-added resellers are showing momentum throughout its channels.
"The value-added reseller side of the business is growing significantly faster than the corporate, and faster than the Dell revenue," the spokesman said.