EqualLogic Gives Dell a Boost

Friday May 30th 2008 by Paul Shread
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Dell's storage sales were a bright spot in the first quarter — and CEO Michael Dell made an interesting claim about the iSCSI market on the company's conference call.

Dell (NASDAQ: DELL) reported surprisingly strong quarterly results late Thursday, helped in part by its acquisition of EqualLogic.

Dell's overall revenues of $16.08 billion were up 9 percent from the same quarter a year ago and about $400 million more than Wall Street analysts expected.

The results were also noteworthy because they were the first to include a full quarter of results from iSCSI specialist EqualLogic (see Is Storage Recession-Proof?).

Dell's storage sales were up 15 percent, or $82 million, to $631 million in the quarter. The company cited strong growth in its PowerVault direct-attached storage (DAS) products and iSCSI sales for the strong results.

Robert W. Baird & Co. analyst Jayson Noland estimated that "organic" growth excluding the EqualLogic acquisition was around 6-8 percent. EqualLogic's last SEC filing reported that the company had $91 million in sales in the first nine months of 2007, an increase of 103 percent from the same period in 2006.

Dell chairman and CEO Michael Dell also made an interesting claim on the call: "We extended our position as the number one worldwide provider of iSCSI SAN solutions," he said.

He cited the new EqualLogic PS5000 and the Dell/EMC AX4-5I for the iSCSI gains.

IDC, for one, listed NetApp (NASDAQ: NTAP) as the iSCSI sales leader as of the end of last year, followed by EMC (NYSE: EMC). It may take a couple of quarters for IDC stats to fully reflect EqualLogic's contribution to Dell, since Dell's first fiscal quarter ended May 2, a month after the first calendar quarter ended. IDC has yet to release its first-quarter statistics for the storage market.

Dell spokesman Kent Cook said Michael Dell was talking about unit shipments. Cook cited Gartner statistics that "Dell installed more iSCSI accessed controller-based ECB disk arrays in the worldwide external controller market in 2007 than any other vendor based on unit shipments."

"EqualLogic will only strengthen our position in the iSCSI market," said Cook.

Enterprise Strategy Group analyst Mark Peters said iSCSI growth in general is being driven by server virtualization. He estimated that about 25-30 percent of users have deployed iSCSI, with another 15-20 percent planning to use the technology.

"Given that server virtualization is the biggest trend in IT infrastructure right now, in our opinion, these statistics speak more precisely to the demand for, and growth of, iSCSI," said Peters. "While Dell doesn't break out its EqualLogic revenue specifically, when EqualLogic was an independent company it certainly was a leader in terms of dollars and we believe that Dell is investing heavily in that business to grow it faster."

Dell shares were up 8 percent in Friday morning trading.

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