In the hyper-competitive storage market, it seems that one vendor’s pain is another vendor’s gain. We’ve heard from three market sources recently that Dell’s largest-ever acquisition — its $1.4bn purchase of EqualLogic — has hit some difficulties around defections and uncertainties from the SAN vendor’s existing channel partners. Resellers who pushed EqualLogic’s offering in the past are worried about being crushed by Dell’s powerful direct-sales machine, as has happened to some of Dell’s ‘partners’ in the past.
Based on the recent numbers posted by rival SAN vendor Compellent Technologies, there may be something to those concerns. Compellent, which recently signed up its 1,000th customer, said second-quarter sales surged 74% to $21m — which is about what they were for the first two quarters of 2007 combined. (The performance, along with the forecast for profitability for the rest of the year, helped spark a 20% rally in the company’s shares over the past month.) At a recent investment banking technology conference, Compellent CEO Phil Soran told us he’s looking to poach EqualLogic’s channel partners. We’ve heard similar plans coming from rival storage player Lefthand Networks.
How well Dell is able to balance the sales channels for EqualLogic will go a long way toward determining how much of a boost the acquisition will give to its emerging push into storage. Already, the return on EqualLogic is made more challenging by the fact that Dell bought it literally at the top of the market. The day that Dell announced the acquisition, the Nasdaq hit a level it hadn’t seen since early 2001. (The index is currently off 14% since then, after having dropped as much as 23% from its early-November highs.) To make its high-priced acquisition of EqualLogic pay off, Dell is going to have to work hard to keep its new SAN rivals from siphoning off channel sales.