Pure Storage CEO: Dell-EMC Deal Didn't Come From Strength

The CEO of Pure Storage said Dell’s proposed acquisition of EMC will create confusion and strategy shifts, enabling his company to win customers and channel partners from EMC.

"I don't believe that was a transaction that came out of strength," said Scott Dietzen, CEO of Mountain View, Calif.-based Pure Storage. "In particular, there was a bunch of concern [from EMC] about whole product portfolio or substantial product portfolio turnover in a very competitive market as a public company."

Dietzen told attendees of the Raymond James Technology Investors Conference on Monday that EMC's fear that its existing technology portfolio was falling behind prompted two recent acquisitions in the flash space for the vendor.

[Related: Pure Storage Completes IPO, Looks Ahead To Competitive All-Flash Storage Market]

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"[EMC was] convinced that they were the company with the most to lose, that their incumbent technology was not going to make the leap to the flash future," Dietzen said at the Marriott East Side in New York.

EMC strongly contested Dietzen’s assertions.

"The opportunity to create one of the most powerful companies in IT history, a highly complementary portfolio that spans 22 Gartner leadership quadrants, highly complementary channels all managed as a private entity add up to a position of enormous strength," an EMC spokesperson said in a statement.

Dietzen praised EMC for doing more than the rest of the competition, which he said has essentially stood still from a technology development standpoint and continued to cash in on a project-based storage resale model.

From Dietzen's perspective, some of Pure Storage's competitors correctly predicted the disruption flash or cloud technologies would create in the storage space. But no one other than Pure Storage accurately anticipated both trends, Dietzen said, meaning all competitors -- including EMC -- are at least two years away from delivering both the flash and cloud storage capabilities Pure Storage offers today.

"We think this is largely shaping out to a two-horse race: us and EMC, even as part of Dell, contesting who will be No. 1 in the Tier 1 storage market of the future," Dietzen said.

Dietzen cautioned EMC partners and customers that private-equity transactions -- such as Dell’s proposed $67 billion purchase of Hopkinton, Mass.-based EMC -- typically result in consolidation of product lines, reductions in head count and strategic changes.

Conversely, Dietzen said, 6-year-old Pure Storage is the fastest-growing vendor in the history of the storage, networking and security spaces, expanding by 167 percent over the past year to annual sales of $131 million and gross margins of 62 percent. In just three years, Pure Storage has gone from zero to 1,350 customers, Dietzen said.

And with the completion of an initial public offering in October, Raymond James projects Pure Storage could deliver $600 million of annual sales within a couple of years.

Pure Storage's unparalleled prowess with both flash and cloud-based storage offerings has enabled consumers to affordably shift to these emerging technologies today, Dietzen said, created tremendous pain for the competition.

"The rest of the incumbents are not delivering sufficient value to these customers to be winning these deals," Dietzen said. "We want to press that advantage as aggressively as we can."

There has been significant merger and acquisition interest in Pure Storage, Dietzen said, but the company has turned all prospective suitors down, as the business is hitting on all cylinders and already seeing such high levels of organic growth.

"The best outcome for investors as well as customers and partners is to continue to grow as an independent company," Dietzen said.

Dietzen urged investors to carefully examine any mergers and acquisitions coming out of the storage market and not just take vendors at their word.

"I think you will see it's more likely coming out of weakness rather than strength," Dietzen said.