For EMC, Dell Hell In EqualLogic

[qi:023] Dell (DELL), the Round Rock, Texas-based computer maker, is not known for splurging billions of dollars on acquisitions. So its decision to buy Nashua, N.H.-based storage networking equipment maker EqualLogic for a whopping $1.4 billion in cash has certainly drawn attention.

“Storage is the fastest part of Dell’s business,” CEO Michael Dell said in an interview with The New York Times. “There’s an explosion in the amount of data being consumed.”

Storage brings in about $2.4 billion a year for Dell, much of it from the resale of devices made by EMC Corp. (EMC). In other words, despite making a lot of sales, Dell doesn’t get a bigger piece of the pie. No wonder Michael Dell is looking to cut EMC out of the picture and take control of the company’s storage destiny.
Some may not remember, but at VMWorld back in September Michael Dell himself introduced a new, non-EMC iSCSI SAN product, the MD3000i. He said that the growth was in the small- and medium-sized businesses, and that traditional storage guys were ignoring the market. His declaration of independence should concern EMC, because Dell has been EMC’s play in the fast-growing SMB market.
“If the MD3000i turns out to be a fast-moving product, EMC will likely see a drop in revenue from Dell, which could force a restructuring of their relationship,” writes Ashok Kumar, analyst with CRT Capital Holdings, an investment bank based in Stamford, Conn. “EMC has historically been a demanding and jealous business partner.”