Dell finds a rare bright spot in demand for iSCSI storage

Like many technology vendors, Dell has been battered in recent months by a steep drop in demand for computers and other technology products. Yet demand remains strong for one of Dell's smaller product families, the EqualLogic range of iSCSI (Internet SCSI) storage-area network products.

"A lot of the growth is coming from virtualization," said Travis Vigil, senior global manager for storage at Dell.

Dell acquired EqualLogic in January 2008, paying $US1.4 billion to acquire the company and its iSCSI product line.

ISCSI is a transport protocol that allows blocks of data to be carried over an IP network without the need for specialized networking interconnects, like Fibre Channel. The technology has gained in popularity as more companies look to virtualization to improve the efficiency and performance of servers and applications. Compared to Fibre Channel, iSCSI can be cheaper and less complex to roll out, which makes it attractive to companies worried about managing costs.

That's translated into higher demand for Dell's iSCSI products, particularly among companies with between 500 and 5,000 employees. During the first quarter, sales of EqualLogic iSCSI products rose 71 percent over the same period last year, even as Dell's overall storage sales declined by 17 percent, to $534 million.

While revenue growth was strong, the profitability of the product line cannot be determined since Dell's financial statements don't provide that level of granularity.

Analysts and others will be watching closely when Dell reports its second-quarter results later Thursday. To be sure, iSCSI storage products alone won't reverse Dell's fortunes or do much to counter a sharp slowdown in PC sales. The company estimates these products will generate $400 million in revenue this year; that's equivalent to just 0.7 percent of the $61.1 billion in revenue that Dell reported for its previous fiscal year, which ended in January.

Even so, strong demand for these products has been a rare bright spot for Dell executives who've otherwise struggled in recent quarters with sinking demand for the company's products.