Costa Mesa’s Emulex Corp. has regained some ground in a running game of catch-up with rival QLogic Corp. of Aliso Viejo.
In the first quarter, Emulex gained some market share for a profitable bit of electronics used in data storage networks.
Behind the gain: The company’s host bus adapters were designed into new servers by Sun Microsystems Inc. and IBM Corp.
“Our industry has a long design cycle,” said Brian Reed, vice president of business development for Emulex. “We are beginning to see the fruits of our more than 100 design wins.”
The company’s market share for host bus adapters grew to about 39% in the first quarter, up nearly 2 percentage points from the fourth quarter, according to Redwood City-based market tracker Dell’Oro Group.
QLogic’s still easily on top with 47% of the market in the first quarter, though its stake was down slightly from about 49% in the fourth quarter.
Together, Emulex and QLogic hold about 80% of the market.
Brocade Communications Systems Inc., Cisco Systems Inc., LSI Logic Corp., and McData Corp. have the rest.
The rivalry between Emulex and QLogic is a storied one.
Emulex spun off QLogic in 1994. The two were neighbors until 1999, when QLogic moved to Aliso Viejo.
The two have been duking it out for years to be the top maker of fibre channel host bus adapters,circuit boards that help data flow between computers.
In 2005, they were neck and neck, splitting the lion’s share of the market. In the fourth quarter of 2005, Emulex counted 42.6% of the market, while QLogic stood at 44.2%.
That changed last year when QLogic pulled away, nabbing 49% of the market in the first quarter of 2006, versus Emulex’s 37.6%.
The pattern continued for most of last year, with QLogic holding about a 10-point lead over Emulex.
Then came a boost for Emulex,the design wins with Sun and IBM.
Big Blue already was a top customer. Sun was a new win. Other customers are EMC Corp., Hewlett-Packard Co., Dell Inc. and Fujitsu Ltd.
Emulex could gain further, according to Tam Dell’Oro, president of Dell’Oro Group.
Emulex’s Challenge
A key issue remains.
Despite the design wins, Emulex doesn’t seem to be making great strides in diversifying its customer base, according to Dell’Oro.
It’s a top goal of Emulex Chief Executive Jim McCluney, who took over late last year.
Sales of host bus adapters to a handful of customers make up about 75% of Emulex’s $440 million in yearly sales.
QLogic, which has traditionally gone after smaller customers, is working to attract bigger ones by refashioning itself from a onetime maker of chips and circuit boards to a supplier of more complex networking gear.
Both companies are set to compete in a new segment,host bus adapters for blade servers.
Blade servers are powerful, slimmed down versions of traditional servers.
Five years ago, when blade servers were new, computer makers produced host bus adapters themselves. Now they’re turning to QLogic and Emulex because it’s cheaper.
“Now that the market is a little more mature, (blade servers) are all pure upside to these guys,” Dell’Oro said. “It’s going to bring more than $50 million of new business to them in 2007.”
Sales of adapters for blades, also called mezzanine cards, are expected to triple next year, according to Dell’Oro.
