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Compellent – The Inevitable Acquisition

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Well, the announcement has been made and it’s official, Dell and Compellent are in talks over a “merger” which basically means Dell acquiring Compellent for around $27.50 per share.  The press release can be found here.  Even as recently as a couple of weeks ago, Compellent were denying acquisition rumours.

Compellent’s share price has risen dramatically in the last couple of days (see chart), presumably as speculation rose on the possibility of the acquisition.  However, the current share price (and peak) are well above the suggested price from Dell and I guess that signifies a number of things.  Either speculators got greedy and overpurchased or they expected another bidder to come into the market and trump Dell as happened over 3Par.  But who would want to do that now?  HP surely wouldn’t bother as they have 3Par and have made it plain that 3Par is the foundation of their future storage plans for the next 10 years.  EMC are unlikely to even see Compellent as being worth their effort.  IBM have focused on their own new technology in the shape of the v7000 array.  Hitachi/HDS don’t acquire technologies and in any case they have existing modular products and no need of the Compellent technology.  What about Netapp?  Well, they have ploughed their own furrow and built a strategy around (their own definition of) unified storage; one array to rule them all, so perhaps not.

For those companies not in the storage business directly (like Cisco, Microsoft), then Compellent doesn’t seem a large enough acquisition to make any impact to their existing business.  So it looks like Dell might finally be lucky this time after being the jilted bride so many times before.

Compellent would fit easily into Dell’s server/storage business, meeting the requirements of medium sized businesses for which Equallogic is too small.  This of course would directly affect their EMC/CLARiiON reseller relationship, which in any case seems to have been on rocky ground over the last few years – more of a marriage of convenience than a partnership for life.  This still leaves Dell with a big gap at the top end of the market.  Theoretically they can resell Symmetrix/V-MAX (although I have no direct evidence or experience of V-MAX sales via Dell) but EMC may decide to break completely with their reseller agreement (and in any case I think the Symmetrix business for Dell wasn’t that large or profitable), leaving a big gap in the Dell storage portfolio.

Whilst ultimately for Compellent the Dell acquisition is likely to be a good thing, for Dell their storage strategy remains incomplete and that will be an ongoing problem for them to compete with the likes of IBM, HP and VCE in the stack wars.  One little suggestion; Compellent shareholders, when you get your cash, you may not want to put it into Dell stock…

About Chris M Evans

Chris M Evans has worked in the technology industry since 1987, starting as a systems programmer on the IBM mainframe platform, while retaining an interest in storage. After working abroad, he co-founded an Internet-based music distribution company during the .com era, returning to consultancy in the new millennium. In 2009 Chris co-founded Langton Blue Ltd (www.langtonblue.com), a boutique consultancy firm focused on delivering business benefit through efficient technology deployments. Chris writes a popular blog at http://blog.architecting.it, attends many conferences and invitation-only events and can be found providing regular industry contributions through Twitter (@chrismevans) and other social media outlets.
  • http://juku.it/en Enrico Signoretti

    Chris,
    Well, Dell’s storage products portfolio isn’t wide at the moment but they are doing good with a small steps strategy.
    Exanet will be out soon, Equallogic is doing very good, Dell’s datacenter enterprise sales are rising.

    if they will spend “only” 900M$ they’ll save 1.4B$ (if compared with HP/3PAr bid). Yes, 3Par is well positioned in the high end but they haven’t a customer base and the HP channel needs to be trained (CML has more than 3000 happy proud customers and resellers all around the world).

    And last but not least, 1.4B$ has a very long tail (just imagine how much money Dell can spend in R&D, marketing & advertising, etc.) while HP needs to run very fast to monetize their investment soon while speaking to customers why drop they beloved Hitachi or EVA stuff! ;-)

    Enrico

    • http://www.brookend.com Chris Evans

      Enrico

      I agree with you that Dell have been successful with Equallogic, however that’s a pure iSCSI product and as Marc Farley has mentioned many times will never have FCoE or FC added to it. So Dell need something at that top end. They certainly have saved money by not acquiring 3Par but that product would have given them more of a foothold in Enterprise. If HP drop the XP, then how about a Dell OEM agreement for the VSP from Hitachi? That would be interesting!

      Chris

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  • http://www.linkedin.com/in/kennethhui Kenneth Hui

    Chris and Enrico,

    Going with HDS for the high-end seems a natural for Dell if the EMC relationship ends. “Saving” 1.4B by buying Compellent instead of 3PAR may help the balance sheet but I am not sure it would do much in terms of innovation. Dell has never been a vendor that brought solutions to market driven by their R&D.

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