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Compellent swoops in, saves Dell storage

Nearly doubled revenue

Internet Security Threat Report 2014

Dell's fiscal 2012 second quarter storage revenues, shrunk by lost EMC business, would have shown no growth or even a loss but for booming Compellent sales.

Overall storage revenues dropped 20 per cent year-on-year to $502m. The company's numbers indicate that Dell's sales of EMC-sourced storage dropped 61.6 per cent compared to the same quarter a year ago. Revenues from Dell-owned storage products, such as Compellent, EqualLogic, PowerVault and Ocarina, rose around 15 per cent to $393m.

Stifel Nicolaus analyst Aaron Rakers calculates that Compellent revenues, which Dell said had increased 97 per cent compared to the first 2011 quarter, were about $65m. He estimates that this means revenues from the other Dell-owned storage products were unchanged from the year-ago quarter or even slightly down. He thinks this continues a trend seen with Dell's EqualLogic sales last quarter.

The company cited a supply chain problem which has been rectified plus a revenue dip just before a new EqualLogic operating system delivery. Rakers thinks there might also have been some missteps in the running of the EqualLogic storage business, what he calls "executional challenge/confusion" around the closing of the Compellent acquisition.

According to Dell's Brad Andersen, SVP for the enterprise solutions group, revenues from Dell-owned storage in the small and medium business market were up 27 per cent year-on-year, with EqualLogic remaining the iSCSI storage leader. Compellent results reflected increased geographic cover, with Andersen saying in the earnings call: "We sold Compellent in 47 countries in Q2 compared to only 30 in Q1."

The transition from EMC storage to Dell-owned IP has beneftted profitability as: "Gross margin per cent has increased approximately 800 bps (basis points) over the past 12 months."

Asked about slackening storage growth, CFO Brian Gladden said: "We [have] just got to work through the tail of EMC and so we continue to be on a path that, by end of year, we should [see] positive storage growth overall and continue to be in double digits for Dell IP."

Compellent storage sales provided the boost needed to show revenue growth in Dell-owned storage products in the quarter. Without them the picture would have been very different. ®

Internet Security Threat Report 2014

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