Nearly a year after striking a wide-rangingfor developing and selling storage systems, the two companies are ready to launch the Dell-EMC CX600, a large storage system for tasks such as data backup, e-mail or video streaming.
The CX600 is largely based on EMC's technology, but the systems will bear both brands when sold by Dell, which will be one of the primary sales conduits for EMC. Increased cooperation on manufacturing and development will follow on subsequent machines.
With the CX600, Dell will "move up into the enterprise space and target some markets they haven't targeted before," said Russell Bailey, senior manager for storage product management at Dell. "Our goal is to increase (market share), and our hope and philosophy is that if we can increase storage share...(and) increase our overall revenues."
Boosting storage revenue is important to Dell's goal oftotal revenue in the next few years. Dell's plan includes expanding efforts in the consumer market, and possibly and (PDAs).
But the potential profit is far larger for selling services, hardware and communications equipment to corporate America, which is Dell's playground, said Walter Winnitzki, analyst at First Albany.
Those connections will be important for EMC. Once touted as one of the "four horsemen" of the Internet, the company's stock price and profits have sagged with the declining market and a surge of competition from IBM, Japanese conglomerates and Hewlett-Packard.
The CX600 follows Dell's strategy of undercutting the competition on price to quickly gain market share.
An entry-level CX600 installation will cost about $98,000--cheaper than an equivalent EVA SAN system from HP, Bailey said. Although this is Dell's list price, such hardware often sells for less through negotiated deals.
The CX600, to be manufactured by EMC, will be compatible with current EMC hardware and software, allowing customers to use the new equipment with gear already installed. It uses a 2-gigabitconnection to send and receive data.
Dell estimates that the worldwide storage market is worth $33.9 billion. With the new product, the company says it can address all but the very peak of the market, valued at about $29 billion, essentially doubling its opportunity in the marketplace.
Analysts believe that Dell, which isn't a particularly large storage player, could use the EMC relationship to become a top seller in the market.
"Dell has been an up-and-comer. It's got terrific position in the server marketplace," said John Webster, analyst with Data Mobility Group. "The challenge is to translate that into the storage marketplace."
That will take time. So far, Dell has done the best with network-attached storage, which is less specialized, less expensive and fits better with the company's business model, Webster said.
"I think Dell is very much of a dark horse in this market, in that it could be a strong and influential player because of the breadth of its coverage and strength in Windows (servers)."
Dell and EMC on equal ground
Dell will get lots of help, in the form of the new CX600 and EMC's large base of customers and its software.
The introduction of the CX600 signifies a bond between Dell and EMC that is tighter than Dell's relationships with other hardware partners. The companies are on a much more equal footing than other Dell partners, which simply supply products with Dell badges.
Though EMC manufactures the CX600 for Dell, it also gets equal billing on the new product, something Dell's other partners don't get. EMC will also sell the SAN device under its own brand as the EMC Clarion CX600.
In return, Dell gives EMC a new distribution channel, direct to the small- and medium-business and government markets. EMC has agreed not to pursue these companies outside of Dell. Meanwhile, Dell has put together product bundles for the two markets that include Dell-EMC hardware, software and services.
Dell will also manufacture products for EMC, helping the storage maker to cut costs. Sources expect that Dell will manufacture EMC's Clarion CX400 and CX200 products soon and will also sell them under its Dell-EMC brand.
Dell representatives declined to comment on specifics.
Partnerships like this may become more common in the future as companies look to plug holes in their own product offerings, Bear Stearns analyst Andy Neff said in a report last week. These alliances are far less costly than acquisitions. On the other hand, divorce is a more likely possibility. Sun, he added, may even join the Dell-EMC pact some day.
Also, both companies have always been loners to a certain degree. Dell has acquired only two companies in its history, and the operations from the first acquisition--a storage company called ConvergeNet--were wound down a few years after the purchase.
EMC, meanwhile, has never had a lasting relationship with a server maker, though servers are often sold at the same time as storage systems. IBM and Sun Microsystems have been longtime antagonists. EMC and HP used to work together, but are now rivals.
"The collaboration on reaching (new) markets is going extremely well," Dell's Russell said. "We will work with EMC on collaborating on future products, and in the future we will focus on manufacturing some of these products. We can teach EMC that we can build and manufacture the products at a lower cost."
News.com's Michael Kanellos contributed to this report.