ANALYSIS: Dell is getting a quality storage company for way less than half of what it would have paid for 3PAR.
Dell, by announcing Dec. 13 that it is acquiring Compellent
Technologies for $960 million, may have pure-lucked its way into a
Back on Sept. 2, when the Round Rock, Texas-based PC, server and
storage maker surrendered to Hewlett-Packard after a 10-day bidding
war, enabling HP to buy storage provider 3PAR for $2.3 billion
, things looked pretty dreary indeed.
After all, it's corporately embarrassing to be outbid by a major
competitor for a property that a company really wants. Egos were indeed
involved, and Michael Dell's was undoubtedly bruised.
However, as well-thought-of and as solid as 3PAR's scale-out storage
products are, Compellent's are probably better for a lot of companies
because they're of a later generation that has long since solved common
storage problems [read that bottlenecks] of the past.
Not to say that 3PAR hasn't solved most of those, too; to be fair, 3PAR
will work better on some kinds of workloads than Compellent's.
Compellent's systems, like 3PAR's, are preoptimized for virtualization
layers that include VMware and Microsoft Hyper-V, thus its storage
systems are cloud-computing ready right out of the box. No code need be
written; that's music to a storage admin's ears.
But the clincher here is this: Dell is getting this company for way less than half of what it would have paid for 3PAR.
3PAR door closed, but a new window opened
It's been said that when a door closes, a window opens. Dell saw that open window and climbed through.
Compellent has been one of the fastest-growing block-based external
storage companies in the world for the last four years, according to a
number of industry analysts, including Gartner and IDC. That momentum,
which works out to more than a 150 percent increase in revenue
during that span of time, was telling potential acquirers something
No other storage company could boast that kind of growth during the
last half of the decade, especially in a down economy, and that
included 3PAR, Data Domain and others. We should all be so lucky to
experience a 150 percent increase in revenue.
Compellent's frontline StorageCenter SAN system won a slew of industry
awards during the last three years, including eWEEK's and InfoWorld's
"Best SAN" of the year. The Eden Prairie, Minn.-based company has a
fast-growing list of loyal customers that keeps returning for updates
as soon as they are available; StorageCenter is now selling very well.
"Our growth is fueled by our innovation; we provide real-world
technology answers to needs that other storage solutions simply don't
address," Compellent Senior Vice President Bruce Kornfeld said.
Compellent made one of the first automated storage tiering systems that
actually worked the way it is supposed to work. Storage intelligence
(knowing what content goes where within the system, based on preset
policies), deduplication, thin-provisioning and tight security is built
right into the system, not bolted on later as options, as many other
The company's service division also has won plaudits for its quality and responsiveness.
Niche is midmarket, but larger enterprises a target
Compellent has made its niche in the midsize business. But its storage
systems can work just as well, meaning "scale out" with the best of
them, for larger enterprises, too. Dell was the Tier 1 systems
provider that finally saw the value in all of this and made the move.
There was backshop industry talk that IBM was looking seriously at
Compellent back in 2008. Don't know what happened there, but IBM has
picked up several other storage-related companies (Diligent, XIV, and
Storwize are three of them) since then, and none of those have the IP
How in the world did Compellent stay independent for so long? It is
likely that CEO Phil Soran, a savvy sales and technical expert who also
co-founded Xiotech (probably the next midsize storage company to be
acquired), was simply waiting for the right suitor. He certainly was in
no hurry; his company has been doing quite well, as noted above.
What does this do for Dell? Plenty. Adding Compellent to its other
pickups of EqualLogic and Perot Systems, gives Dell a much stronger
position in the data center battle with IBM, HP and Oracle. Potential
storage customers now will have a wider set of options in the
soon-to-be-upgraded Dell catalog.
Analyst Greg Richardson of Technology Business Research said he
believes Dell's acquisition "is another milestone on the company's road
to becoming an enterprise solutions vendor. Through large acquisitions
... Dell is increasingly shedding its M.O. of high-volume PC and x86
server manufacturer to become a provider of solutions that offer
"The acquisition will better align Dell with competitors IBM and HP,
who can address large-scale buildouts of integrated hardware and
software with their services and software portfolios."
Compellent will help Dell power its push into enterprise cloud and virtualization markets, Richardson said.
"By coupling Compellent's SAN portfolio with its x86 business, Dell
will be able to go to market with a stronger set of integrated data
center solutions, an initiative that the company has enacted to help
support corporate profitability. As Dell increasingly attaches storage
to its compute capabilities, the company will benefit from more
efficient sales, better positioning it for increased revenue and profit
growth," Richardson said.
In summary, it certainly looks like Dell made a smart move, in both
buying the company and then announcing that it is retaining Soran as a
vice president, most of his exec team, and more than 400 current
Compellent employees on the Minnesota campus.
A classy operation all around.