Compellent – The Inevitable Acquisition

Well, the announcement has been made and it’s official, Dell and Compellent are in talks over a “merger” which basically means Dell acquiring Compellent for around $27.50 per share.  The press release can be found here.  Even as recently as a couple of weeks ago, Compellent were denying acquisition rumours.

Compellent’s share price has risen dramatically in the last couple of days (see chart), presumably as speculation rose on the possibility of the acquisition.  However, the current share price (and peak) are well above the suggested price from Dell and I guess that signifies a number of things.  Either speculators got greedy and overpurchased or they expected another bidder to come into the market and trump Dell as happened over 3Par.  But who would want to do that now?  HP surely wouldn’t bother as they have 3Par and have made it plain that 3Par is the foundation of their future storage plans for the next 10 years.  EMC are unlikely to even see Compellent as being worth their effort.  IBM have focused on their own new technology in the shape of the v7000 array.  Hitachi/HDS don’t acquire technologies and in any case they have existing modular products and no need of the Compellent technology.  What about Netapp?  Well, they have ploughed their own furrow and built a strategy around (their own definition of) unified storage; one array to rule them all, so perhaps not.

For those companies not in the storage business directly (like Cisco, Microsoft), then Compellent doesn’t seem a large enough acquisition to make any impact to their existing business.  So it looks like Dell might finally be lucky this time after being the jilted bride so many times before.

Compellent would fit easily into Dell’s server/storage business, meeting the requirements of medium sized businesses for which Equallogic is too small.  This of course would directly affect their EMC/CLARiiON reseller relationship, which in any case seems to have been on rocky ground over the last few years – more of a marriage of convenience than a partnership for life.  This still leaves Dell with a big gap at the top end of the market.  Theoretically they can resell Symmetrix/V-MAX (although I have no direct evidence or experience of V-MAX sales via Dell) but EMC may decide to break completely with their reseller agreement (and in any case I think the Symmetrix business for Dell wasn’t that large or profitable), leaving a big gap in the Dell storage portfolio.

Whilst ultimately for Compellent the Dell acquisition is likely to be a good thing, for Dell their storage strategy remains incomplete and that will be an ongoing problem for them to compete with the likes of IBM, HP and VCE in the stack wars.  One little suggestion; Compellent shareholders, when you get your cash, you may not want to put it into Dell stock…