Dell Making Big Headway in Storage Disk Market

The PC giant is attaching storage sales to server sales like no one else, analysts said.

Dell has struggled to find growth recently in its core PC business, but it appears to have found ample room and opportunity in disk storage.

The Round Rock, Texas, IT systems maker saw its third-quarter disk storage hardware revenue soar 17.9 percent over the same period last year, to $409 million from $347 million, and its third-quarter storage hardware factory revenue rise a full 20 percent over 2006, from $507 million to $609 million.

The quarterly revenue of market leaders EMC (3.9 percent), IBM (3.3 percent) and HP (0.0 percent) grew modestly, if at all. Hitachi, at 9.9 percent revenue growth, was second to Dell.

Overall, the strong quarterly performance, as reported by the IDC Worldwide Quarterly Disk Storage Systems Tracker, put Dell (at 9.3 percent market share) squarely in the No. 4 overall disk storage space behind longtime leaders EMC (21.9 percent), IBM (14 percent) and Hewlett-Packard (13.4 percent).

Dell's numbers are expected to continue to improve in this area. Last month, the company announced that it will acquire progressive storage startup EqualLogic and its speedy iSCSI storage software connectivity for $1.4 billion.

"Dell has done an excellent job in identifying an opportunity to complement the Dell-EMC offerings they sell," Brad Nisbet, an analyst with IDC Storage Research, told eWEEK.

"Several quarters ago, they revitalized their own storage product line [PowerVault], and it is paying off. In Q307, the Dell-EMC products sold through Dell were up 7.8 percent. Respectable, but the Dell PowerVault line was up 52 percent," Nisbet said.

This was driven by sales of its new MD line of entry-level and midrange storage arrays aimed at supporting its server sales, Nisbet said.

"Dell has done a great job at attaching storage sales to their server sales. For many customers, especially in midsized or the larger end of midsized companies, the Dell-EMC product is an appropriate fit. But for many of Dell's customers, especially the large base of SMB customers, their own PowerVault line of DAS [direct-attached storage] and SAN [storage area network] storage arrays is a perfect fit for simple add-on storage for their server environments," Nisbet said.

Nisbet said he thinks the Dell-EqualLogic marriage will be a good fit, thanks largely to the promising future in general of iSCSI systems, which continue to be improved.

"iSCSI is still poised to be a huge opportunity for storage systems vendors," Nisbet said. "There are two major components: SMB and virtualized server environments-aka VMware today; VMWare, Microsoft, Zen, etc., tomorrow. I think Dell is poised to attack both components of this opportunity.

"They've got their MD3000i-their own PowerVault product-that is aimed particularly at SMBs and somewhat to support VMware. I think Dell's proposed acquisition of EqualLogic will help enable them to offer a more complete end-to-end solution for virtualized server environments-end-to-end meaning a solution that provides both server and storage components specific for VMware."

Overall, worldwide external disk storage systems factory revenues in the third quarter of 2007 grew 5.1 percent from a year ago to $4.4 billion, marking 19 consecutive quarters of year-over-year growth.

For the quarter, the total disk storage systems market grew to $6.3 billion, up 4.3 percent from the prior year's quarter. Total disk storage systems capacity shipped grew 49.4 percent from the year-ago quarter, reaching 1.3 exabytes.

EMC maintained its lead in the external disk storage systems market with 21.9 percent revenue share, followed by IBM and HP in a statistical tie for the No. 2 position with 14.0 percent and 13.4 percent revenue share, respectively. Dell and Hitachi rounded out the top five with 9.3 percent and 8.5 percent, respectively.

In network disk storage systems, EMC kept its leadership with 27.8 percent revenue share, followed by HP and IBM with 13.2 percent and 12.3 percent revenue share, respectively.

In the open SAN market, which reached $2.5 billion and grew 9.3 percent year over year, EMC was the top vendor, with 25.0 percent revenue share, followed by HP, with 15.4 percent. The NAS (network-attached storage) market grew 11.4 percent year over year to $668 million, led by EMC with 38.1 percent revenue share and followed by Network Appliance with 27.2 percent share.

The iSCSI SAN market continues to show strong momentum, posting 43.9 percent revenue growth year over year, reaching $207 million in the third quarter. Network Appliance continues to lead the market with 20.5 percent share, followed by EMC with 18.0 percent share.

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