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If Dell buys Compellent, it loses EMC partnership

Lucas Mearian | Dec. 10, 2010
Dell will have a difficult time integrating Compellent's technology into its portfolio

"It wouldn't be a bidding war, it would be a pissing war, which is not impossible. At the current price and with the money these people have been throwing around lately, a billion dollars to make it awkward for Dell is neither here nor there. But, they don't stand to gain much," said Mark Peters, an analyst with market research firm Enterprise Strategy Group.

The most likely of the larger players to enter the fray, Peters said, would be NetApp - not because it needs Compellent's technology, but because a deal would further extend its share of the storage market.

Compellent sells SANs and the software to manage them. Most notably, the company offers software that automates the movement of data between tiers of storage. For example, Compellent's Fluid Data technology allows IT administrators set policies that place the highest priority data, such as in relational databases, on high-performance and expensive solid state drives, while placing less timely data, such as e-mail traffic, on high capacity, less expensive serial ATA (SATA) drives.

Compellent's technology also offers thin provisioning, a means by which administrators can increase the utilization rates of their storage by allocating only what is needed by servers applications instead of the more common practice of overprovisioning capacity.

Compellent also announced last month the latest version of its SAN technology, Storage Center 5.4, which incorporates several hardware upgrades as well as adding storage virtualization to its bag of software tools. The new virtualization software allows two Compellent SANs to be seen as a single pool of storage by application servers, as well as to migrate data seamlessly between them.

Compellent is debt-free public company and sells its products exclusively through a channel sales network in 35 countries. The company said its SANs are installed at 3,000 customer sites.

If Dell acquires Compellent, it faces an uphill battle to integrate the technology into its current product line. In 2007, Dell purchased EqualLogic , an iSCSI SAN vendor whose products are aimed at the same midrange market as Compellent's products. Last month, Dell reported its sales of midrange iSCSI SANs from its EqualLogic line were up 66% year over year.

"Although [Compellent] has recently expanded from SAN into NAS with the help of open-source software, its architecture remains limited to general-purpose environments," Paul Mansky, managing director of equity research for Canaccord Financial. "Scalability challenges inherent to the architecture have historically precluded Compellent from engaging in an enterprise environment."

In all likelihood, Dell would not cannibalize its own midrange sales and it would instead need to take some of the $1.6 billion it saved by not purchasing 3Par and invest it in beefing up Compellent's products for higher-end customers.

"It's a five-year plan either way," Taneja said.

 

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