EMC, Dell Deal to Target Midmarket

Five-year, multibillion-dollar deal will allow both companies to better exploit the midmarket segment.

ORLANDO, Fla.—The resale deal announced with Dell Computer Corp. this morning is indicative of more future arrangements EMC Corp. will take to cut costs and expand into more niches.

The five-year deal also allows both companies to better exploit the midmarket segment, Dell and EMC officials said.

The deal, which officials from both companies would only say is in the "multibillion-dollar" range, gives EMC a new outlet for its low-end CLARiiON systems, which President and CEO Joe Tucci said last week the Hopkinton, Mass., company needs to do a better job of marketing.

"We will be the undisputed leader, clearly unseating Compaq [Computer Corp.] in this case. [But] Id be a fool to sit here and say we could eliminate channel conflict entirely," Tucci said. "Its our intent to never sell any of these products without the software and service element attached," he said, when asked about EMCs ongoing value-add opportunities.

As for the speculated hardware commoditization that could undermine that value, he said, "We dont quite have that yet, but its approaching that."

The partnership with Dell, of Round Rock, Texas, is only the start of more such deals from EMC, Greg Ambulos, vice president of global channels for EMC, said in an interview here at the Storage Networking World show. EMC also plans to expand its existing relationships with consultancies like Accenture Ltd., service providers like Electronic Data Systems Corp., and independent software developers and vertical-market focused companies, he said. Its also possible that EMC will target multiple companies in those spaces to address regional needs, Ambulos said.

Moreover, the deal will help EMC in sales that are based on servers, an area in which the company has been lagging, and in learning better ways to control inventory, supply chains and manufacturing costs, which are areas Dell is well-known for, Ambulos said.

The deal will also help EMC compete with Network Appliance Inc., which has been a strong competitor in the low-end storage market.

Meanwhile, for Dell, the deal gives the computer maker a new, credible revenue stream to help it compete against rivals Compaq and Hewlett-Packard Co., which will be particularly important if the two companies follow through with their planned merger.

Dell will use CLARiiON systems for both its network-attached storage and storage-area network product lines, officials said.

Both companies also spoke, without elaboration, about future product co-development.

The move, in theory, "is just stinking brilliant," said industry analyst Steve Duplessie, of Enterprise Storage Group Inc., of Milford, Mass., speaking late last month when rumors of the announcement surfaced.