What Dell didn't say about EMC

 
Its interesting.  If you search the transcript from Dell's earnings call yesterday for "EMC" nothing comes up.

Searching on the word storage, I've copied and pasted every reference I found to storage in it.

Brian Gladden (part of his presentation)
Storage revenue was down 8% sequentially and 19% year-over-year. EqualLogic revenue was up 31% with continued strength from a margin standpoint. Our overall storage margin rates are up over 30% versus where they were last year.

Michael Dell (from his comments)
We are focused on expanding our recurring revenue and profit streams with a differentiated view of how to win in the enterprise. Storage and server revenues were up 5% sequentially as we continue to bring our customers an expanding portfolio of best value enterprise solutions.

EqualLogic grew 31% year-over-year with a strong pipeline heading into Q4 including demand for our recently launched PS4000 virtualized storage array. We have now added over 10,000 new customers to the EqualLogic platform bringing almost 15,000 customers and we continue to invest in the R&D, solutions and sales resources to expand this platform.

From the Q&A section:

David Bailey - Goldman Sachs

The non-EqualLogic storage sales were weak this quarter. What are you doing to reverse this trend and how long do you think it will take?

Michael Dell

There is a shift going on there where we are moving away from non-Dell branded storage offerings. You can think of this as dual margin pass through revenue. So our margin on storage continues to increase and with the additional, better mix of sales also comes service annuities which obviously are valuable over time to us. So we are moving more and more to the portfolio f Dell IP, Dell branded and in some cases co-branded products. That is the direction. That is why you see the shift in the mix and the increased margins.

Jayson Noland - Robert W. Baird & Co., Inc.

A question on the timing of various hardware categories. It seems like Dell storage and server has seen fairly positive trends over the past couple of quarters. If you could talk about how your customers are thinking about investment in data center hardware versus investment in the client?

Michael Dell

Well as I said earlier I think the mission critical data center activity has been high and the [inaudible] processor brought out the virtualization wave in a big way because it accelerated the number of servers you could virtualize in one platform. We have been particularly strong with our blade offering, with our data center custom solutions, with our storage offerings. We think our 11G combined server and really management solution that goes with that is a fantastic offering that is really resonating with customers. It is a place where there is a bias for investment inside these accounts.

So what's changed?

from CRN slightly more than 1 year ago:

Dell, on the other hand, accounted for 10.4 percent of EMC's total revenue, and slightly under 30 percent of Clariion revenue, Goulden said.

Dell has traditionally been EMC's largest channel partner, accounting for about one-third of EMC's revenue. However, Dell acquired EqualLogic early this year, giving it a product line and an indirect channel which competes with EMC.

When asked by analysts during the Q&A session following EMC's prepared statements about the 26-percent year-to-year and 10-percent quarter-to-quarter drop in Dell business, Joe Tucci, EMC's chairman, president, and CEO, said that the strong growth of the Clariion business came from two factors: a robust channel build-out and an increase in EMC's commercial and SMB business.

"On the other hand, we are very quickly and very actively working with Dell, and -- if you talk to (Dell Chairman and CEO) Michael Dell, he'll have the same statement -- we believe there's a lot more we can and should be doing together," Tucci said. "We probably got a little bit off track, and we're working hard to include the Dell channel on top of everything else we're doing." 

The StorageRap take on the whole mess:

Dell has figured out that EqualLogic's product is very strong and they like the higher margins.  But it doesn't look like they have figured out that it is targeted at SMB customers and isn't really a great fit for large data center and cloud customers. Dell needs to figure out there is a disconnect here or they might find themselves with a lot of explaining to do at some point in the future.

VCE.  EMC is in love with a new server systems friend named Cisco. The Cisco relationship has been getting a lot of attention from EMC this year and Dell feels rejected.  But what can they say after buying EqualLogic?  Nothing about EMC, apparently.

EMC has lost its star partner for Clariion.  It's not clear how its going to make that business back any time soon - especially with their big focus on VCE.  Its a big gamble to be sure.  Not that EMC has stopped developing Clariion, because they haven't, but the SMB options continue to improve - from Dell-EqualLogic, from Compellent and - at the high end of this space - from 3PAR with our F Class systems.  I don't see how Cisco is going to replace Dell any time soon as a friend for Clariion.

I'd like to invite everybody with aging Clariion systems to check out 3PAR's F Class cluster storage arrays - especially the Thin Conversion feature that can get you much higher utilization and consolidation rates than you think are possible from mid-range and enetrprise storage.

 

Comments

[nate]

Whatever dell does PLEASE DON'T BUY 3PAR(the company) I want them to stay independent! Don't give your former employer(s) any ideas Marc!!

Last week some guy on the register was speculating HP should buy 3PAR and ditch the HDS OEM relationship.

stay under the radar!

[marc farley]

Egad! I've seen so many rumors - all of them generated by externals. They don't effect us very much here - we've been successful as an independent company after going public and intend to stay that way as far as I know.

As far as giving Dell ideas, believe me they saw the HP gossip. If the letters H and P show up etched on a bathroom door in a remote Andes outpost, Dell is there trying to figure out what it means. It just seems to be the culture there.