Dell Debuts Servers for Penny Pinchers

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SAN FRANCISCO (Reuters) – Dell Inc is introducing new server and storage products aimed at cost-conscious companies, betting that its emphasis on value can help win market share as competition intensifies.

The announcement on Tuesday comes as the corporate server market heated up considerably over the past week, with the much-anticipated entry of network equipment maker Cisco Systems Inc, and widely-reported merger talks between market leader IBM and high-end server maker Sun Microsystems Inc.

Seeking to distinguish itself from competitors offering more expensive products developed on proprietary technology, Dell said its portfolio of 14 new products is designed to save companies time and money though improved efficiency, adoption of open standard infrastructure and virtualization technology.

“We think simplifying IT, driving efficiency in the data center, helping our customers consolidate and virtualize to save costs is actually the strategy that will ultimately win in the industry,” Steve Schuckenbrock, president of large enterprise for Dell, said in an interview last week.

The new products include PowerEdge servers and workstations based on Intel Corp’s next-generation Nehalem processor, EqualLogic storage arrays and software designed to help simplify IT management in a single console. The servers will begin shipping on Monday, when Intel is expected to formally announce Nehalem.

Industry analysts, who were briefed on the new products by Dell, spoke positively on Monday about the products and the strategy.

“What Dell’s focusing on is trying to show customers a way to save money…so they can free up resources to invest in new applications and I think that is a good overall story and strategy for 2009,” said IDC analyst Matt Eastwood.

“One of the things Dell is really stressing is designing to value.”

Dell is the No. 2 maker of x86 computer servers, which are low- to mid-range servers based on standard industry components. The company is No. 3 in the overall server market, behind IBM and Hewlett-Packard Co.

An IBM-Sun deal would pose a direct threat to HP in the high-end Unix server market, where Dell does not compete, but analysts have said Dell could face hurdles in the long run as its competitors are able to offer more comprehensive software and services alongside hardware products.

Speaking in Tokyo on Tuesday, Dell Chief Executive Michael Dell said talk of IBM possibly buying Sun provided an “enormous opportunity” for Dell, as it helps accelerate the migration to x86-based servers.

Charles King, an analyst with Pund-IT, said emphasizing cost in the current environment was the right approach for Dell. “The value of x86 virtualization as a technology for server consolidation is really beyond a doubt,” he said.

“I think they’re hitting a lot of the right notes with this. We’re at a critical point in the server business…if companies are going to move ahead with IT purchases they are doing so when the products are either going to save them money or make them money.”

Dell said customers saving money on its standardized equipment will reinvest that savings in new products and help drive growth and boost sales of its service and software offerings.

“The only platform in the world that continues to grow year in and year out is x86 open architecture and Dell is the only company that’s pure to that architecture,” Schuckenbrock said, adding that cost-conscious customers are not looking for more expensive, proprietary solutions like those offered by IBM and HP.

Servers and networking products made up 10 percent of Dell’s revenue in fiscal 2009, with services accounting for 9 percent and storage 4 percent. Personal computers made up around 60 percent.

Round Rock, Texas-based Dell’s shares have rebounded in the past month after hitting their 52-week low of $7.84 back in February, rising around 18 percent.