Dell Computer Corp. and Hopkinton, Mass.-based EMC Corp. said today they have agreed to a five-year strategic deal in which Dell will sell EMC's midrange storage products in an arrangement that could be worth billions of dollars.
Under the agreement, Dell and EMC said they will cobrand EMC's Clariion line of enterprise storage systems. Financial terms weren't disclosed. The two companies have also agreed to work together to promote EMC's higher-end Symmetrix line of storage systems and software. Dell and EMC will also look for opportunities to use Dell's procurement and manufacturing capabilities in the production of Clariion products.
The deal allows Dell, which has been trying to move beyond the declining PC market, to offer its enterprise customers a broader range of storage products, including support for Unix operating systems. "We believe this agreement effectively doubles Dell's market opportunity in the data storage business," said Kevin Rollins, Dell president and chief operating officer. "EMC's storage systems complement our own portfolio of enterprise computing systems and services, and customers will be the beneficiaries."
For EMC, the agreement with Dell will help increase its market position in the Windows NT and Windows 2000 storage markets. "We expect Dell's direct sales model will increase EMC's reach and capability to better service enterprise-class Clariion customers, including a much broader set of small and medium-sized businesses," said Joseph Tucci, EMC president and CEO. Tucci said EMC's new relationship with Dell will help the storage company more rapidly gain market share.
Brett Miller, an analyst at A.G. Edwards & Sons Inc. in St. Louis, said the deal gives Dell a leg up in the storage market. "Dell has had some starts and stops in the storage market," he said. Miller said EMC's decision to outsource its sales and eventually its production and procurement to Dell is another sign of the commoditization, declining prices and profit margins and increasing competition, of the storage market.
Joseph Beaulieu, an analyst at Chicago-based Morningstar Inc., said the agreement gives EMC another way to sell its midtier storage products while tightening its cost structure.
"EMC gets more salespeople on the street with its products without beating up its own sales force," he said. And Dell, which has lost a large percentage of its profits in the PC market because of its ongoing price war with competitors, is able to move beyond the PC into a product with higher margins, Beaulieu said.