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Dell Deal Is a High Point For ScaleMatrix’s Cloud

Dell will begin selling cloud computing services from San Diego-based ScaleMatrix Inc.

The big computer manufacturer recently chose ScaleMatrix as one of three strategic partners to provide public cloud computing services in North America.

Financial terms of the partnership were not disclosed. But a ScaleMatrix spokesman said the move will bring jobs to San Diego — as well as business originating outside the region.

The move comes as Dell changes its approach to providing cloud services, ending “in-house” service in favor of partnerships. Texas-based Dell chose three California-based companies to be its initial partners in North America. Separately, Dell is putting a greater emphasis on partners for the Europe, Middle East and Africa markets.

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Cloud Computing

Cloud computing is software and computer storage marketed as a utility. Software and storage are located off a client’s premises and accessed via the Internet.

ScaleMatrix spokesman James Heller said the news was significant for San Diego because the partnership will bring clients from outside the region to the region. He declined to give specifics, but said the deal would bring the company several million dollars in net new revenue per year.

ScaleMatrix is based in San Diego’s Kearny Mesa neighborhood. It has a second data center in Katy, Texas, near Houston. The company is privately held and does not disclose revenue.

The company is one of the only VMware enterprise service providers in the San Diego market, Heller said. VMware Inc., based in Palo Alto, makes software that boosts efficiency by splitting applications among a minimum number of computer servers. ScaleMatrix also has a novel, patented cooling system for its server racks.

‘Cutting-Edge Security’

Dell approached ScaleMatrix about doing the work a month ago, Heller recalled. The corporation’s other partners are San Francisco-based Joyent and Sherman Oaks-based ZeroLag.

Dell notes that the three providers give customers three distinct sets of offerings. It calls the ScaleMatrix cloud hosting platform “innovative,” offering enhanced control over functionality and performance. It notes the San Diego company offers “cutting-edge security” and distributed denial of service mitigation services. Distributed denial of service is a hacker’s way of overwhelming a computer server.

Dell — based in the Austin suburb of Round Rock, Texas — offers hardware, software and services.

It reported net income of $2.37 billion on net revenue of $56.9 billion in the fiscal year that ended in February. Dell ranks 51st on the Fortune 500 list of public companies, behind United Technologies and ahead of Dow Chemical. The company’s Nasdaq symbol is DELL.

The Texas computer maker recently reported first quarter net income of $130 million, or 7 cents per share, on revenue of $14.07 billion. When viewed on a non-GAAP basis, which excludes certain charges, earnings came to 21 cents per share — below an analysts’ consensus of 35 cents per share.

Seamless Transition Required

Dell announced in February that founder and CEO Michael Dell, along with private equity firm Silver Lake, planned to take the company private. The prospective buyers offered $24.4 billion, or $13.65 per share in cash. More recently, investor Carl Icahn and Southeastern Asset Management reportedly offered $12 per share in cash for the company.

So Dell is a company in transition.

ScaleMatrix’s data center, which formally opened in August 2011, takes up 100,000 square feet. Its first floor is 40 percent occupied.

ScaleMatrix will need to make sure that the transition for Dell’s cloud clients is as seamless as possible, Heller said. To make the partnership work, he said the San Diego company will need to offer a better technical solution and better customer service, or an improved “level of touch.”

ScaleMatrix is hiring and Heller said the Dell partnership will likely increase the number of technical jobs the company needs to fill.

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