Dell trumps HP with Rackspace deal

Dell Computer wins a multimillion-dollar contract to provide servers and data storage equipment to data-hosting company Rackspace.

John G. Spooner Staff Writer, CNET News.com
John Spooner
covers the PC market, chips and automotive technology.
John G. Spooner
3 min read
Dell Computer on Monday said it beat out rival Hewlett-Packard for a multimillion-dollar contract to provide servers and data storage equipment to data-hosting company Rackspace.

The Austin, Texas-based PC manufacturer also updated two of its PowerEdge Servers, equipping them with faster processors and improved management features.

Under the deal, Rackspace, one of the survivors in the Web hosting industry, says it plans to buy several million dollars worth of equipment from Dell as it expands its customer base and services.

Rackspace evaluated servers from Compaq (now part of Hewlett-Packard) and Dell during a process over the course of about five months.

"We could not get the attention we wanted from Compaq, whereas Dell was more aggressive...and attentive to our questions," said Morris Miller, managing director and co-founder at Rackspace. The company has a mix of about 6,000 servers from different manufacturers.

The contract highlights the increasing competition between Dell and HP. Since HP announced its intent to acquire Compaq nearly a year ago, Dell has stated that the merger would distract HP and drive customers to Dell. For its part, HP has said the deal would give it the opportunity to sell a far broader array of products and services, especially in comparison to Dell.

HP in fact has landed a number of high-profile deals, including multiyear, multimillion dollar deals with the U.S. Postal Service and General Mills, and keeps many customers from defecting.

Still, Dell's market share has increased while that of the combined HP-Compaq has slid.

"I think they were completely focused on their merger and not focused on the customer...on us," Miller said.

While Compaq was only able to show Rackspace engineers its current products, which were based on the older Pentium III Xeon chips, Dell invited the engineers to its Austin headquarters and showed them its next-generation servers. Those machines, which were in development at the time, are now shipping with Intel's Xeon processor, based on the Pentium 4 processor architecture.

Merger regulations prevented HP from showing off its future product line at that time. The HP-Compaq merger closed on May 3. While HP customers received product road maps on or soon after that date, the company couldn't discuss its plans before then.

Lack of insight into HP's plans as the merger turned did affect HP, but executives say the company has since rebounded.

"We have lost some business, no question, as a result of the uncertainty," said Jim Milton, HP's head of U.S. sales, in a recent interview with CNET News.com. "Most of that would have been between September and May 7. On May 7 the uncertainty was eliminated."

More to sell
In other news, Dell on Monday began selling the PowerEdge 600SC server, a low-cost, single-processor server primarily targeted at small and medium-sized customers, and the PowerEdge 2600, a two-processor server for larger customers.

The PowerEdge 600SC, which starts at $599 without an operating system, comes with Intel Celeron or Pentium 4 processors, up to 4GB of memory and a Gigabit Ethernet controller. It replaces the PowerEdge 500SC.

The PowerEdge 2600, meanwhile, replaces the PowerEdge 2500. While Dell has adopted faster processors and improved other components, the most significant changes revolve around how the server can be managed, said Russ Ray, senior product manager for PowerEdge servers. The new box, for instance, will come with the Active ID, an automated warning system. When a component is about to fail, a blue LED (light-emitting diode) turns beige.

When an IT manager has dozens of identical servers lined up together in a control center, the warning light makes it easier to find a server with a problem, the company said.