Middle-market companies are an attractive customer group for EMC and other large data storage firms such as Hewlett-Packard ( HPQ) and IBM ( IBM).

Many need to put storage systems in place to create an electronic paper trail for lawsuits and other regulatory matters as well as for data backup and retrieval in the event of a physical disruption, says Simon Robinson, director of storage market research for the technology analysis firm 451 Group.

"Small- and medium-sized businesses are facing the same sorts of data growth, storage and management issues that larger enterprises are facing," Robinson says.

EqualLogic's products run on a newer storage technology called Internet SCS, or iSCSI, that appeals to smaller firms because it runs on their existing computer networks. Traditional storage technology, called Fiber Channel, runs on a separate network and requires a different set of skills and expertise to manage.

Dell doesn't resell EMC's iSCSI products.

The market for iSCSI technology is still small compared to the overall amount spent on storage, but it's one of the fastest-growing segments of the industry. According to data research firm IDC, the iSCSI market swelled by over 57% in the second quarter, reaching $191 million.

During first nine months of the year, EqualLogic had revenue of $91 million, a 34% increase over its total 2006 sales.

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