Dell Computer Corp., the world's largest maker of personal computers, agreed to make new, lower-cost storage systems for EMC Corp as both companies seek to boost profit and expand sales.
The partners announced the agreement today to mark the one- year anniversary of a five-year accord to explore sharing technology, reducing the cost of parts and reselling some EMC storage products.
The new system, designed by EMC and to be made by both companies, is the Clariion CX200 and will sell for less than US$28,000 for the base configuration. Dell entered the deal with EMC as a way to increase profit as PCs become cheaper. EMC needs to boost sales beyond its multimillion-dollar machines for large companies to the market for small and medium-sized businesses.
"We are trying to take the best of both companies and take share," EMC Chief Executive Officer Joseph Tucci said on a conference call with analysts. "The virtual entity we formed is working well."
Shares of EMC fell US$0.42, or 7.8 percent, to US$5 at 4pm in New York Stock Exchange composite trading. They've declined 63 percent this year. Dell shares fell US$0.10 to US$28.94 on the NASDAQ Stock Market and have gained 6.5 percent this year. EMC was the second-best performer on the Standard & Poor's 500 Index during the 1990s, behind Dell.
Dell will make the CX200 in Austin, Texas, where it has its headquarters, and in Limerick, Ireland, and Penang, Malaysia. EMC, the world's largest maker of network computer data-storage systems, will build the machine and its full line of Clariion systems in Apex, North Carolina, and Cork, Ireland. EMC is based in Hopkinton, Massachusetts.
The systems will begin shipping in early December, initially with machines made by EMC. Dell will begin to make and ship the systems early in the first quarter next year, said Joel Schwartz, EMC senior vice president and general manager.
EMC will get a licensing fee from the machines Dell makes and sells, Tucci said on the call. The manufacturing agreement was expected, as both companies said they were talking about expanding the relationship.
"The relationship is growing stronger everyday," Tucci said.
This is the first time that EMC has developed a product specifically for smaller businesses and the first time it has licensed another company to make its systems, EMC's Schwartz said.
The companies expect to reduce costs because of Dell's ability to get lower prices for parts.
As for expanding the agreement further, ``As we go down the path, nothing is out of the question,'' Tucci said on the call.
Kevin Rollins, Dell president and chief operating officer, added, "Everything is on the table to discuss." Previously Dell's storage products targeted the low end of the market. By working with EMC, Dell's products can reach the middle range.
EMC and Dell have declined to say how much revenue the EMC alliance generates. In the past year, more than 1,500 small and medium-sized businesses plus government and educational customers have bought other Dell/EMC storage systems, the companies said. Of those, about 1,100 customers were new to EMC, Tucci said on the conference call.
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