>For fun, let me play devil's advocate for a few minutes, and pose this question
Good questions.
>First, in the big box arena that I imagine NTAP sells most of their units into, Dell is not the "Big Dog".
We now see that the NTAP relationship is part of the strategy for Dell to move up to the clustered server arena. Using existing off-the-shelf technology (INTC 4x and 8x XEON, fibre channel, etc) and combining it with the easy to manage, very (very) fast, high-capacity, easy to manage NTAP storage scheme, Dell can create tremendous differentiators compared to CPQ, for example. Dell gave us insight into this in the article you cited: "Dell is also preparing an array of supporting products, including high-end storage devices.."
NTAP even gives Dell a co-existence, migration strategy in the UNIX arena!
>Continuing the logic, this means that NetApp will be selling to Dell at a great discount to what they would get otherwise. If NetApp filers are so outstanding, wouldn't customers seek them (NetApps) out anyway, since there would be little competition? Can they afford to lose that margin?
NTAP has been maintaining a 60% margin in their direct sales, which include configurations with racks full of low margin disk drives. NTAP's margins are supported by its proprietary ONTAP software and a custom-built motherboard (with Alpha CPU). I don't know the numbers, but I would bet that the margin on the ONTAP software and custom motherboard are well in excess of 80%. In fact, NTAP's margin on its low-end boxes which support a few 100GB is much higher than on its high-end boxes whichs support 1TB+. It could be argued that NTAP's margins may actually increase as it supplies a more favorable mix of software/motherboards to Dell compared to storage rich configrations through NTAP direct sales.
NTAP's biggest problem has been in getting the word out to the marketplace. Then once the word is out, the problem becomes convincing its prospects to adapt this (r)evolutionary technology from a company much smaller than the big Unix box makers. Dell's marketing strength and reputation will have a profoundly positive effect, IMO.
>Third, according to the new reports I've seen, the NetApp boxes will be branded as "Dell" boxes. NetApp loses its ability to build brand recognition, and, in fact will be competing against themselves at Dell shops.
NetApp has not aggressively pursued the same marketspace that Dell is after. NetApp has effectively impacted sales of Sun, H-P, SGI add-on RAID arrays, and to a lesser degree CPQ RAID arrays. What Dell does is give NTAP a marketing arm into the NT environments. NTAP is more interested in growth and profit than brand recognition.
I suspect that when a sys admin interacts with the filer system, he/she will be well aware that they are administering a Network Appliance, even though the badge on the hardware may not say so.
I have an interesting question for you to consider. The Chm/Board of NetApp is Don Valentine, who co-chairs the CSCO board. Another board member of NetApp is the CFO of CSCO. This morning John Chambers, CEO of CSCO, stated words to the effect that his future acquisitions would include new "data technologies". Could NTAP be a buyout candidate? Just speculation. No insight.
BTW, as of 10:45AM NTAP is up 14%. |
