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Dell strives to fill storage holes

Will plug gaps with storage supplier buy

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Dell will likely make storage supplier acquisitions to fill holes in its offerings, the company has told analysts.

The company held a financial analysts event at its Round Rock, Texas headquarters yesterday. It said it is enduring a spending squeeze by its corporate, public sector and SME customers and sees a transition to virtualised enterprise data centres with lower managegement costs.

Dell doesn't see a need to offer its customers totally integrated stacks - including applications, middleware, hardware and services - and thinks a fully-featured portfolio will drive its growth faster.

It does not think it can get that portfolio by internal or organic growth and is looking to inorganic growth, corporate-speak for acqusitions. A presentation slide put that message clearly: "Inorganic growth is an important enabler."

Acquisitions will include storage companies as the rapid increase in digital information is expanding the IT ecosystem.

Also Dell has been enthused by the success of its $1.4bn EqualLogic buy of November 2007, with revenue from EqualLogic products up 400 per cent since the purchase and a current $500m run rate.

It wants to drive workforce efficiency in large enterprise data centres and help SMEs with their storage growth. Acquisitions will be of profitable companies with products and technologies that can deliver more profits to Dell. It wants products it can sell to its customers on day one, and is not looking to buy in technology to build a more unified product stack.

The company wants to fill holes in its offerings to large enterprises, the public sector and SMEs, and will try to buy independent suppliers of products that its customers are currently buying - just not from Dell.

A Business Week report has said Dell is making part of its business unit boss's pay dependent on their help with Dell growth through acquisitions. Recently Dell hired David Johnson, a 27-year IBM veteran who worked in Big Blue's mergers and acquisitions department. There is a non-compete dispute, and legal action between IBM and Dell about Johnston's work with IBM saying it could harm its own interests.

There were no suggestions made to the analysts as to where Dell might look in the spectrum of storage products. Any storage company with a successful product line in an area where Dell is absent but its customers are not, and with good growth prospects, might well ask what it should do if Dell's acquisition team comes knocking on its door. ®

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