EMC, Dell Feel the Love: Page 2 of 3

The reaffirmation of the EMC/Dell partnership is all the more noteworthy because two years is a very long time in the technology business. And some analysts see some risk to EMC over the long run, suggesting that Dell may eventually start chewing into EMC's own accounts.

"What could have been EMC's revenues now are Dell's... Dell always squeezes their suppliers and comes out a winner," U.S. Bancorp Piper Jaffray analyst Dushyant Desai told Byte and Switch last month (see Dell's Even Sweeter on Storage).

But EMC officials note that, while the company generates less absolute revenue for each system Dell sells, its margins are actually higher. And, in this case, actions speak louder than words: EMC's obviously feeling happy enough with the Dell deal to extend it for another two years.

However, there's also the danger that EMC will further alienate its other reseller partners by getting cozier with Dell. "Within
the channel we continue to see some backlash resulting from EMC's increasing reliance on Dell, with several contacts indicating an increased emphasis on IBM Corp., Storage Technology Corp. (StorageTek), Network Appliance Inc., or Hitachi Ltd.," writes RBC Capital Markets in a research note on Monday. But the firm adds, "It would appear, however, that overall demand for EMC's products remains strong due to the growing Dell contribution."

Analysts say another outcome of the EMC/Dell recommitment ceremony is that it quiets speculation that EMC would divest itself of the Clariion line and that Dell would be the natural acquirer. "This agreement clearly puts ice on that logic," Prigmore says. "EMC clearly intends to keep the Clariion line."