FRAMINGHAM, 9 DECEMBER 2010 - After losing a drawn-out bidding war to Hewlett-Packard to acquire storage vendor 3Par earlier this year, Dell re-opened its coffers in a bid to acquire Compellent Technologies , hoping the company will be the answer to its midrange storage area network (SAN) needs.
Dell's attempt to snatch up 3Par put a strain on its reseller relationship with EMC , and its bid to buy Compellent certainly will represent the death knell.
Dell on Thursday announced that is in advanced talks with Compellent to acquire the company. It initially offered a price of $27.50 per share, or roughly $876 million.
Although there are more than two years left on the reseller contract between Dell and EMC, which was originally signed in 2001, it's unlikely Dell's sales force will pitch EMC's gear with any zeal if it purchases Compellent.
The reseller partnership represented billions of dollars in sales for the two companies. Last year alone, EMC garnered from 8 per cent to 9 per cent of its revenue from its relationship with Dell. For Dell, the partnership equated to 50 per cent of its storage revenue last year -- about 90% of it coming from the resale of EMC's midrange Clariion line and 10% from the high-end Symmetrix systems. If Dell acquires Compellent, it will be in direct competition with the EMC Clariion line that it resells.
The proposed Dell/Compellent deal also represents the sale of one of the last independent SAN vendors available to be purchased by a major data center player. The only remaining SAN vendors are Xiotech, Data Direct, Pillar Data, and Nexsan. But none of these companies compares with Compellent's market reach.
"They're a shining star," said Arun Tenaja, founder and consulting analyst at The Tenaja Group. "They've got an architecture conceptually similar to 3Par's. Anything I would ascribe to 3Par, I'd ascribe to Compellent."
Compellent differs from 3Par in that the latter sold to a higher-end marketplace. 3Par's SANs have an application-specific integrated circuit (ASIC) that offloads advanced functions, giving its systems higher performance. Up to eight 3Par SANs can also be clustered together to offer petabytes of capacity. Compellent's software only allows up to two SANs to be clustered together.
Most industry observers agree it's unlikely Dell will face a bidding war against other competitors for Compellent. EMC, NetApp, Hewlett-Packard, IBM, Oracle and Hitachi Data Systems already have their own flavor of midrange block storage technology. There is, of course, the chance that one of the latter vendors, could bid for Compellent in a defensive move just to keep it out of Dell's hands. Cisco Systems is also a distant contender for Compellent, as it already sells its own lower-end storage systems .
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