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EMC, Intel Forge SAN Deal

Posted by iNext - 2006-04-06

SAN DIEGO -- Storage Networking World -- Intel and EMC today said the chip maker will sell EMC's SANs for SMBs through an OEM deal.

Intel has sold its chips in storage systems and dabbled in networked storage with low-end unbranded SANs made from cheap parts, or "white box" systems. But the EMC partnership significantly steps up its storage profile. Intel will brand EMC's new AX150 Fibre Channel and AX150i iSCSI SANs as the Intel SSR21PP.

The announcement comes one day after EMC and its storage partner Dell announced they would sell the AX150. Dell brands EMC's midrange storage systems, and the low-end AX line fits in particularly well with Dell's focus on small businesses.
 
EMC and Intel tiptoed around Dell at the news conference announcing their deal today, perhaps because Dell is a close partner of both and now faces channel competition from Intel with the AX150.

"This relationship is complementary to the one we have with Dell," says Mitch Breen, EMC SVP of global channels. "That relationship has never been as good as it is today. As fast as this [SMB] market is growing, there's room for all three."

"We wouldn't have done this without talking to Dell first," adds Intel storage group VP Hans Geyer. "They don't consider it a competitive thing -- it's an expansion of the pie."

Dell released a statement indicating it was flattered by Intel's move: "This announcement reflects the leadership and influence Dell has established in the entry storage space. Two years ago, Dell was the only company to offer a customer-installable affordable SAN for under $10,000 in collaboration with EMC. Since then, we’ve achieved tremendous momentum as the fastest growing top-10 disk storage systems vendor. This market is growing rapidly and we’re certainly not surprised that others are trying to achieve the same level of success.”

EMC and Intel reps say their deal will mostly drive sales through Intel resellers in Eastern Europe, the Middle East, and Asia. "EMC already knows how to reach resellers in the U.S. and Western Europe," Geyer says.

Despite efforts to push channel sales, the major storage vendors have not reached the SMB market as well as they planned. That's where Intel comes in, which hits 160,000 international resellers who sell to consumer and small businesses. Geyer says those small businesses are becoming hungry for networked storage.

"SMBs buy their first PC from a reseller, they buy their first server from a reseller, and they'll buy their first storage system from a reseller," Geyer says. "Storage is relatively new to SMBs. For SMBs, storage has been integrated into the server. That's changing."

The deal could affect other storage vendors besides Dell. Intel sells iSCSi white box systems based on products from LeftHand and Xyratex, but Geyer makes it clear that Intel considers EMC its flagship storage vendor.

Intel says its white box running Left Hand SAN/iQ software is selling well and had three times as many sales last quarter as in the fourth quarter of 2005. But Geyer says he expects the EMC system will be an easier sell in its targeted geographic areas.

"LeftHand is harder to sell and it doesn't lend itself to SMBs in emerging markets," he says.

Financial analyst Stever Berg of Punk, Ziegel and Co., says Intel is sending a message that it's serious about storage by picking EMC as its partner.

"Did you ever think of Intel as a big storage player? You do now," he says. "It's going to be a hell of a lot easier for them to sell an EMC box with Intel inside than anybody else's box."

Despite reassurances from EMC and Intel, industry insiders believe the deal could be the first signs of a rift between EMC and Dell. Although their partnership has been financially beneficial to both, many expect Dell to eventually manufacture and sell its own low-end storage systems or seek another partner besides EMC.

"This was inevitable," says one storage analyst who asked to remain anonymous. "Dell is making its own noise about low-end systems."



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