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Dell Hopes To Corner Market In Cost-Conscious Computer Servers

Posted on: Wednesday, 25 March 2009, 14:16 CDT

As competition in the technology sector intensifies, Dell Inc is introducing new server and storage products aimed at cost-conscious companies, in hopes that its emphasis on value can help win market share, Reuters reported.

Over the past week, the corporate server market heated up considerably with the much-anticipated entry of network equipment maker Cisco Systems Inc.

A possible merger between market leader IBM and high-end server maker Sun Microsystems Inc also made headlines a week earlier.

Dell said it hopes to distinguish itself from competitors offering more expensive products developed on proprietary technology.

The 14 new Dell products are designed to save company’s time and money through improved efficiency, adoption of open standard infrastructure and virtualization technology.

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

Dell will introduce 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 are expected to ship out on Monday, when Intel formally announces Nehalem.

Analysts throughout the industry have spoken positively about the new products by Dell and the company’s strategy.

IDC analyst Matt Eastwood said: "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."

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

HP would be forced to directly compete with the IBM-Sun deal in the high-end Unix server market, where Dell does not have much influence.

But many analysts feel Dell could face hurdles in the long run as its competitors are able to offer more comprehensive software and services alongside hardware products.

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.

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

King added that if companies are going to move ahead with IT purchases, they will do so when the products are either going to either save or make them money.

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

Schuckenbrock said 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.

“Cost-conscious customers are not looking for more expensive, proprietary solutions like those offered by IBM and HP,” Schuckenbrock said.

At least 10 percent of Dell's revenue in fiscal 2009 came from servers and networking products. Services accounting was 9 percent and storage 4 percent, while personal computers made up around 60 percent.

Over the past month, Dell's shares have rebounded after hitting their 52-week low of $7.84 back in February, rising around 18 percent.

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Source: redOrbit Staff & Wire Reports

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