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Inside the Dell-EMC Deal: The Importance of Flash

by Tim Green | Dun & Bradstreet Editor

October 13, 2015 | No Comments »

DellFlash storage might not be the biggest part of the very big Dell-EMC deal, but the quickly growing part of the storage market will play a critical role as the combined company competes for cloud-based, data-intensive applications.

Dell’s $67 billion acquisition of EMC, announced Monday, is the largest deal between two technology companies. The companies and analysts said that the combined company will have complementary offerings that range from desktop and laptop PCs to data-center-level storage systems.

EMC is the biggest provider of storage, and most of its revenue comes from the hard disk drives that have served as the storage media of choice for decades. The use of flash storage, however, is rising fast, especially for cloud-based computing applications where quick access to data is important.

Sidebar: See how Dell and EMC previously teamed up on flash

The Flash Market

Overall sales of all-flash systems are still small, just under $1.6 billion in 2014, according to research firm IDC. But they have grown at a faster rate than IDC had first forecast, and IDC projected 2015 sales at about $2.25 billion, up from its previous forecast of $1.8 billion. The total flash market — all-flash and hybrid — was $11 billion in 2014, according to IDC.

EMC is getting a big chunk of that market. Its XtremIO unit leads the all-flash market, and the company expects its sales to hit $1 billion in 2015. EMC acquired XtremIO in 2012.

At $1 billion, that’s still just a fraction of EMC’s revenue, but major storage vendors such as IBM, HP, Western Digital, and Fujitsu and smaller companies such as Pure Storage, Violin Memory, NetApp, and Nimble Storage are investing heavily in flash.

Sales at Pure Storage, which went public last week, have grown from $6.1 million in 2013 to $42.7 million in 2014 to $174.5 million in 2015 (ended January).

Flash Forward

While Dell already sells flash storage systems, the EMC technology provides a wider range of products to customers, especially on the high end.

Besides technology, the combination of Dell and EMC assembles other resources that help them combat newer players like Pure Storage.

Their sales and implementation staffs have contacts with a wide range of customers to develop sales opportunities for flash storage systems and to install them.

And while Michael Dell has touted the private company’s ability to invest without worrying about meeting quarterly financial expectations, it is taking on a mighty amount of debt in the acquisition.

But Dell, of course, prefers to dwell on the positive for now.

“Our new company will be exceptionally well-positioned for growth in the most strategic areas of next generation IT, including digital transformation, software-defined data center, converged infrastructure, hybrid cloud, mobile, and security,” he said in announcing the deal.

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Tim Green has covered business, technology and science at newspapers and in higher education. At Hoover’s he covers computers and telecommunications. Follow him on Twitter.

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