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By eweek  |  Posted 2002-10-21 Print this article Print

: Partnership Pitfalls"> Partnership Pitfalls

Partners also play a role in Dells expansion into printing products, with Lexmark International Inc. producing Dell-branded printers and supplies. In Dells forthcoming Pocket PC devices, an unnamed Taiwan contractor is rumored to be handling manufacturing.

In its year-old partnership with EMC Corp., of Hopkinton, Mass., Dells manufacturing magic is the key ingredient. "We cut costs of EMC technology by 45 percent," said Russ Bailey, senior manager of the Dell-EMC relationship. Bailey said to look for more influence from Dell. "Well roll out more Dell-EMC products. This is the first generation weve had input to," he said.

While EMCs dominant position in the storage market has facilitated Dells entree, EMC could prove a liability as well. The storage company has seen its debts increase and stock values plummet. EMCs troubles have fueled speculation that the storage company may be bought* by an investor or rival. Such a scenario would prove costly and embarrassing for Dell, whose storage strategy is closely tied to EMC, say industry observers. "We are continuing to monitor the situation with EMC. Their health is of concern to us," said Bailey. In an indication that Dell is keeping its options open, he said, "We like EMCs strategy, but we will continue to evaluate others."

Another partnership that has also proved somewhat troublesome for Dell has been its relationship with Intel Corp. While Dell has historically relied solely on the company to provide all the microprocessors that power its computer products, recently Dell executives have found themselves at odds with Intel, of Santa Clara, Calif., over the chip makers design of its first 64-bit microprocessor, called Itanium. The chip, co-developed by HP, features a new architecture that is largely incompatible with existing Windows-based applications. Dell executives privately admit they would have preferred a chip design that was fully compatible with existing applications.

"This is a raging debate that is going on right now," Dell said.

Advanced Micro Devices Inc., of Sunnyvale, Calif., plans early next year to introduce a server chip—called Opteron—that will preserve compatibility with existing applications. Although, analysts said, a Dell decision to adopt Opteron would anger key partner Intel, Dell officials said they are considering it. "We are evaluating that technology and will have a definitive response by [years end]," said Holt.

The companys partnership with Microsoft, of Redmond., Wash., likewise has been a cornerstone of the companys success. Although a few years ago, Dell might have avoided loading the Linux operating system on some of its servers to avoid upsetting Microsoft, fully 12 percent of Dell servers run the operating system, according to Peter Morowski, vice president of software for Dells enterprise systems group. "We look at Linux as our Unix," Morowski said, adding that the Intel architecture is penetrating deeper into the data center.

Indeed, in recent years, Dell has extended its enterprise product lines by offering more rack-mounted servers, powerful four- and eight-way Intel Xeon-based systems, and high-performance computing clusters.

Nevertheless, some IT managers are skeptical the company can offer the enterprise-class products they depend on to run their businesses.

"We buy a lot of their stuff ... but when it comes down to doing the things youve got to count on, we tend to be pretty risk-averse," said Robert Reeder, senior vice president and CIO of Alaska Airlines, in Seattle. "You dont want transaction systems failing, and you dont need to be hooking up with a vendor that thinks the system is just another PC."

Some system managers said past problems with Dells enterprise equipment have made them reluctant to try the company again.

"At the time we evaluated them [18 months ago], they were going through the process of changing their server management tools, and they were not very complete for doing remote server management. They also had announced a new RAID controller but were shipping the old one but promising a free upgrade later that would require a server rebuild," said Larry Shaw, senior systems engineer for Nordstrom Inc., also in Seattle. "There were a number of little things that were a pain."

Whether Dell can successfully integrate and build these new ventures on top of its core business will prove challenging but not impossible, said Andy Neff, an analyst with Bear Stearns & Co., in New York.

"If we talked about Dell getting into storage five years ago, we would have said, Well, they cant do storage. Neff said. "Skepticism is healthy, but they have a history of doing this."

Stan Gibson contributed to this report.

Related Stories:
  • Interview: Dell: Direct, as Always
  • Editorial: Dell: Triumphs and Challenges
  • Dells Printer, PDA Bids to Put Pressure on HP
  • Commentary: Dell Applies Winning Formula to New Areas * An earlier version of this story inaccurately implied that EMCs financial challenges could result in its filing for bankruptcy protection. eWeek regrets and has redacted the implication.


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