Datalink-MCSI Consolidation: Sum Could Outweigh the Parts

Datalink acquired fellow storage VAR Midrange Computer Solutions Feb. 1 and overnight became one of the largest vendors of Sun, EMC, IBM and Symantec storage solutions.

The purchase, for $14 million ($5 million cash and $9 million in Datalink shares), makes a storage VAR with the potential for $160 million in annual revenue–MCSI’s $47 million from 2006 and Datalink’s $117 in 2005, the most recent figures available.

It also extends the Datalink’s market reach in the Northeast, Midwest, South and southern California as well as the financial services, communications, health care and manufacturing industries, both companies said.

But the sum is even greater than the parts, with each adding a new component, said Janet Waxman and Christina Richmond, channel researchers at IDC, in a research note on the acquisition.

“This is a mega merger of two storage partner giants,” the pair wrote. “The new company will be a mega force in the storage market and shows that consolidation is a two way street.”

“Storage suppliers that work with either will realize a benefit from the combined companies with each one’s strong SAN, NAS and ILM focus and strong storage expertise,” the article said. But “those storage suppliers that are not currently in the mix with Datalink may suffer as this is a now a powerhouse partner and a flagship one as well …. Not being a supplier in the portfolio may raise questions and those partners that are competing with other suppliers will need more support to battle this giant.”

“This type of merger moves the dial towards the power shift that has been afoot for a while, which is that the market cannot be seen only through a supplier or customer lens, and that it is vital to consider the power of the partners.”