HP Deal Leaves Compellent a Bridesmaid Once Again

| About: Compellent Technologies, (CML)

Seems every time a big technology company dips into the pool of storage vendors with a significant acquisition, people start wondering whether Compellent Technologies Inc. (NYSE:CML) is the next to get snapped up. For now, at least, it isn't.

Instead, Hewlett-Packard Co. (NYSE:HPQ) on Wednesday said it would acquire storage area networking and virtualization provider LeftHand Networks Inc. for $360 million in cash. LeftHand's focus on midsize companies or branches of larger enterprises is somewhat similar to Compellent's small-business SAN specialty.

This point was apparently clear to execs at Compellent, who couldn't resist but issue a statement in response to the HP deal. Noting the deal's similarity to Dell Inc.'s (NASDAQ:DELL) $1.4 billion purchase last year of storage software maker EqualLogic Inc., Compellent president and CEO Phil Soran argued that integrating a storage technology vendor's products into a big hardware player's is bad, bad, bad for clients.

The LeftHand deal "demonstrates legacy vendors' approach to meeting the needs of the mid-sized enterprise market: buy someone else's technology and try to fit it into an existing product portfolio, which leads customers to a rip-and-replace strategy as they grow," Soran said. "While this may be easier for the vendors than developing their own scalable architecture, it is certainly not better for customers." 

Adds Compellent's marketing chief Bruce Kornfeld: "We expect that this market consolidation will enhance our ability to close more deals with end-users and the channel."

While it seems Compellent is hanging in there as an independent, it's hard to imagine that the market is going to get easier to compete in for the vendor, assuming HP, Dell and other buyers of the company's rivals can successfully stitch these deals together.

Shares of Compellent dipped to $12.45, a 3.3% decline, in morning trading, to recover somewhat in the afternoon. -- Olaf de Senerpont Domis

See Oct. 1 Compellent statement on HP's LeftHand deal from BusinessWire
See Oct. 1 press release on HP's acquisition of LeftHand from BusinessWire
See Oct. 1 post on HP's dealmaking from Tech Confidential
See April 9 post on Compellent from Tech Confidential
See November 2007 post on Dell's EqualLogic purchase from Tech Confidential