Although Dell’s server and networking business enjoyed gains in the most recent quarter, the company’s storage business is slowly declining, leading to concerns about its future health. Dell’s second-quarter earnings report Aug. 21 showed that the company’s PC business, which makes up half of the company’s revenue, continued to decline. In a bid to bolster its bottom line, Dell is attempting an aggressive expansion into new areas such as enterprise services. “Dell is crossing the chasm between their old business model and new,” said Patrick Moorhead, principal analyst at Moor Insights. “Stepping back from PCs is hard. [CEO] Michael [Dell] has guts, that's for sure.” But that transition has been a painful one. Dell reported an 18 percent decline in profits, from $890 million to $790 million, as revenue fell 8 percent to $14.5 billion. Dell’s business now includes servers, networking, storage, and services, which collectively represent 31 percent of the company’s revenue. That business is in the midst of a leadership transition following the departure of Brad Anderson, who had led Dell’s Enterprise Solutions since 2005 and oversaw the build-out of Dell’s IP storage and networking portfolio via acquisitions such as EqualLogic, Compellent and Force10. His replacement is Marius Haas, who led HP’s networking division and helped oversee the Compaq-HP transition. Of course, the question is always whether Anderson jumped or was pushed. Dell’s storage business has steadily declined, and the most recent results indicate that revenue fell 13 percent to $435 million a year ago. The silver lining, if you’re Dell, is that those revenues represent just 3 percent of the company’s total. In a conference call with analysts, Michael Dell noted that enterprise demand was solid and demand for Dell’s PowerEdge servers continues to be strong. “And increasingly, we're changing the sale to be a complete data center sale,” he said. So if Dell is bundling storage along with its PowerEdge sales as a complete solution, why do Dell’s storage revenues continue to fall? This analyst-call exchange may sum it all up: “To follow up, I wanted to follow up on the storage question with the Dell-owned IP business,” Chris Whitmore of Deutsche Bank asked. “It looks like your server attach, thinking about Dell-owned IP attached to servers, it looks like it's actually declining. Michael, in your comments you talked about increasingly winning these whole data center sales. So, can you help us understand is there a timing issue between the server and storage spend as they're upgrading server versus storage, or are you seeing some incremental competition translate into a decreasing win rate in that storage business?" “You know, I think we can definitely do more there,” Dell responded. “What I'd also tell you is that the line that separates what's a server and what's storage is not as clear as it might have been a few years ago. If you look at our 12th generation servers you'll notice that they have enormous disk capacities. So, you're seeing large amounts of storage show up inside the server itself. But, 12G is certainly strong. Storage was not as strong as we'd like and there's definitely room to grow that faster.”

Pushing Forward

Despite those earnings results, Dell is obviously pushing forward. On Aug. 22, the company announced its densest storage array yet: the new PowerVault MD3, which can store up to 180 terabytes of data in a 60-drive, 4U rack enclosure. As a 12U configuration, with one MD3 dense array combined with two MD3 dense expansion enclosures, the storage solution can scale up to 180 hard drives and store up to 540 terabytes of data. The new MD3 dense arrays include Dynamic Disk Pools (DDP) that help maintain affordable, high-bandwidth computing by recovering failed drives faster than traditional RAID environments.   Image: Dell