Dell's acquisition of EqualLogic a good fit, analysts say

Dell’s acquisition of IP storage-area network (SAN) vendor EqualLogic is being met with approval from analysts who say the deal fits well into Dell’s storage strategy.

The acquisition, analysts say, is not only significant because it is the largest cash takeover of a venture-backed tech company, but because it jibes so well with Dell’s focus on IT simplification for small and midsize businesses (SMB).

Making storage as easy to install and manage as servers is the crux of Dell’s strategy, says Praveen Asthana, director of enterprise storage for Dell.

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Dell’s acquisition of IP storage-area network (SAN) vendor EqualLogic is being met with approval from analysts who say the deal fits well into Dell’s storage strategy.

The acquisition, analysts say, is not only significant because it is the largest cash takeover of a venture-backed tech company, but because it jibes so well with Dell’s focus on IT simplification for small and midsize businesses (SMB).

Making storage as easy to install and manage as servers is the crux of Dell’s strategy, says Praveen Asthana, director of enterprise storage for Dell.

"Storage needs to be simple, capable and affordable," says Asthana, who adds that storage is Dell’s fastest-growing business. "The customers who are most in need of IT simplification are small and midsize businesses because they don't have IT staffs or have limited resources. They want something to be simple so they can do it themselves.”

Storage accounts for $2.4 billion of Dell’s $57 billion in annual revenue.

The acquisition of EqualLogic, a vendor that makes easy-to-deploy iSCSI storage arrays, is a perfect fit for a company that focuses as much of its business on SMBs, analysts say.

“iSCSI can lead to lower costs, easier maintenance and simpler management of storage networks than is possible with Fibre Channel SANs that need to be specially deployed and managed,” says Charles King, senior analyst for Pund-IT Research. “[The] cost-effectiveness and familiarity [of EqualLogic storage] especially appeals to small and medium businesses, which just happens to be a sweet spot for Dell's server business.”

“This [acquisition] enables Dell to potentially create and dominate the SMB storage market with a proven product,” says Tony Asaro, senior analyst for the Enterprise Strategy Group. “The SMB storage market needs a combination of the ‘right’ product and a vendor with enough brand-awareness and resources to make storage networking pervasive in the SMB.”

Research firm IDC expects that the market for the easily deployable and inexpensive iSCSI will grow from $600 million in 2006 to $6 billion in 2011.

Despite their overwhelming support of the pricy $1.4 billion acquisition, analysts say integrating EqualLogic’s iSCSI technology poses a number of challenges for the Round Rock, Texas-based company, which specializes in commodity PCs and servers.

“Dell should benefit from the deal if it can manage successfully the challenges that it faces, namely, solving the problem of how to integrate EqualLogic's technology into its PowerVault line, managing EqualLogic and its channels in such a way that it can continue to sell on non-Dell platforms and finding a way to continue successfully what has been a mutually profitable partnership with EMC,” says David Hill, senior analyst for the Mesabi Group.