Partners Endorse Dell's Bid For Compellent, But Question Product Overlap

Dell's plan to acquire storage vendor Compellent has the strong approval of some of its top solution providers who find the combination of the two the best way for both to grow going forward.

However, the channel does have some reservations over the proposed acquisition given the potential overlap in storage products between Compellent and the Dell-EqualLogic lines, and the potential for Dell to turn Compellent into a low-margin offering.

Dell on Thursday said it and Compellent are in discussions about Dell acquiring Compellent for a total of about $876 million, a move which would give Dell one of the industry's leading storage virtualization technologies and a big boost to its channel base.

The bid to acquire Compellent is the latest effort by Dell to make itself into a bigger player in the storage market, including its unsuccessful bid in September to acquire 3PAR after a short but intense bidding war with Hewlett-Packard, as well as its successful acquisition in early 2008 of storage vendor EqualLogic, which made Dell one of the industry's top storage vendors.

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Patrick Mulvee, vice president of sales and marketing at Sidepath, an Irvine, Calif.-based solution provider and partner to both Dell and Compellent, said his company is ecstatic over the possible acquisition.

A typical customer solution for Sidepath includes Dell servers, Compellent storage, VMware virtualization software, and Brocade networking, Mulvee said.

Sidepath does work occasionally with Dell's EqualLogic storage offering, and has been an EqualLogic partner for years, Mulvee said. "But then we fell in love with Compellent," he said.

Dell can help Compellent accelerate its storage technology development, Mulvee said. "Dell has a ton of money to throw at Compellent to add new features like dedupe and encryption, and to take it to the next level as customers move to the cloud," he said.

The timing of the proposed acquisition is perfect for Sidepath, Mulvee said. "We just doubled our office space, and are building a new demonstration center for Compellent," he said.

Paul Clifford, a principle at Davenport Group, a St. Paul-based solution provider and partner to both vendors, said he was on the telephone all morning talking to customers about the proposed acquisition.

Next: What Do The Customers Think Of Dell-Complellent?

"As long as this is good for customers, it's good for me," Clifford said. "They asked me what I think. After I explained the situation, they said, ah, I see. My whole approach is, if the customer wins, it's good for me. When I look at how Dell acquired EqualLogic, everything got better. Dell committed itself to the channel, and Compellent is all-channel."

Dell moved toward the channel in a very smart way in the last couple of years, Clifford said. "They proved it with EqualLogic," he said. "And if they do the same with Compellent, I'm going to be a very happy man."

Clifford said he is very positive about the proposed acquisition, and that he does not expect Dell to do anything that might impact Compellent customers or channel partners.

"I can't see Phil Soran (Compellent president, CEO, and chairman) doing anything against the channel," he said. "Soran doesn’t need the money. His focus is on the channel. And if this is not in the long-term interest of customers, he won't do it."

Dell can be expected to provide the resources to help Compellent grow, Clifford said, especially after the bruising it took in its fight with HP over 3PAR.

"Dell wanted 3PAR to go after the enterprise market," he said. "They don't need another EqualLogic. With Compellent, they can take on HP, Hitachi, and EMC in the enterprise storage market."

The proposed acquisition by Dell might be positive for solution providers who are not Dell EqualLogic partners, but it could be a disaster for other partners, said Greg Knieriemen, vice president of marketing at Chi, a Cleveland, Ohio-based solution provider and partner to both EqualLogic and Compellent.

There is a lot of overlap between the Compellent and EqualLogic product lines, especially in terms of their midmarket capabilities, Knieriemen said. "Dell can't really absorb Compellent in the same way that it did EqualLogic," he said. "Compellent would be in direct competition with EqualLogic."

Dell-EqualLogic is a low-cost storage line, while Compellent has always had a small premium in its pricing, Knieriemen said.

"Compellent has always held on to its margins," he said. "If Dell starts selling it, the price will fall. But that would still give Dell higher margins because it no longer would resell EMC storage."

Next: Desperation Move By Dell?

With Compellent, Dell would get a second storage controller technology which would be incompatible to that of EqualLogic, both of which would target the midmarket, Knieriemen said.

"Dell has holes to fill in its product line," he said. "But this gives Dell another modular storage product, which is not what Dell really needs. This looks to me like a desperation move by Dell (after losing the 3PAR deal)."

Compellent has great products that customers love, Knieriemen said. But that brings up the question of how such an acquisition might impact Dell's EqualLogic business. "The biggest questions should be coming from EqualLogic engineers," he said. "They should be worried."