Cracks In The Dell-EMC Storage Strategic Partnership Widening

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The recent strain in the strategic storage relationship between EMC and Dell seems to be rapidly turning into a break between the two as Dell, which at one time accounted for 10 percent of EMC's storage revenue, looks to be following its own road.

The fissure between the two storage allies widened on Thursday when Dell reported that fiscal third-quarter 2011 storage sales were up 7 percent year-over-year. At the same time, Dell also said its EqualLogic storage business grew 66 percent over last year.

Dell did not break out revenue of the other main components of its storage, including sales of its own PowerVault appliances, based on its PowerEdge servers, or its Dell-EMC line.

Even without the complete breakdown, it is obvious that the Dell-EMC relationship is in trouble, said Eryck Bredy, president of BNMC, an Andover, Mass.-based solution provider and long-term Dell partner.

"It has to be a strategy of Dell to mention the 66 percent increase in EqualLogic sales," Bredy said. "You'd have to know the actual breakdown to get the whole picture, but it doesn't take a rocket scientist to see what's happening."

What's happening, according to solution providers and analysts, is that EMC and Dell are drifting apart.

Aaron Rakers, an analyst with research firm Stifel Nicolaus, wrote in a report after Dell released its third-quarter financials that the 66 percent growth in Dell's EqualLogic storage compared to a 7 percent growth in its overall storage over last year "notably reflects fracturing Dell/EMC relationship."

Jayson Noland, an analyst with Robert W. Baird & Co., wrote after the financial release that it appears that the EMC contribution to Dell's storage sales is fading. "At this point, we don't believe the EMC relationship is long-term salvageable," Noland wrote.

EMC originally signed Dell as a reseller in October of 2001, and for years Dell was EMC's largest reseller, at times accounting for about one-third of EMC's indirect channel storage sales.

Dell and EMC signed a five-year extension to their reseller agreement in late 2008, but strains between the two were already evident.

That strain dated from late 2007, when Dell unveiled a $1.4 billion bid to acquire EqualLogic, one of the pioneers in the fast-growing iSCSI business. Dell closed that acquisition in 2008.


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