A big acquisition in the data storage network market may create an opening for Aliso Viejo-based QLogic Corp.
San Jose-based Brocade Communications Systems Inc. recently said it plans to buy Broomfield, Colo.-based McData Corp. in a deal valued at $713 million.
The move gives Brocade more than 80% of the $730 million yearly market for switches on data storage networks, according to Tam Dell’Oro, founder of market researcher Dell’Oro Group Inc. in Redwood City.
Cisco Systems Inc. holds 20% of the rest of the market.
Beyond that, QLogic is the only other player with any real stake at around 8% to 9%, including what it private labels for Cisco, Dell’Oro said.
Switches direct data signals on storage networks.
QLogic doesn’t break out sales for the switches but treats them as an important part of its product lineup.
They’re included in the company’s storage area networking unit, which makes up the bulk of the company’s sales.
QLogic also makes circuit boards used to link servers to networks.
With just three switch suppliers,and one dominant one, at that,QLogic could see more switch sales. The company has been at about 9% market share for a few years now.
“I see no downside,” said Rick Franz, vice president of technology and planning at QLogic. “There is potential upside. Manufacturers very much dislike a single vendor.”
Observers like the company’s prospects.
“The real winner may turn out to be QLogic,” said Mike Karp, senior analyst at market researcher Enterprise Management Associates Inc. in Boulder, Colo. “You’ve reduced the number of choices.”
And the remaining choices are limited.
Brocade/McData focus on all segments of the switch market. Cisco is stronger with high-end products. QLogic focuses on switches that are in the mid-range.
Cisco’s products complement QLogic’s, Franz said.
Switches are important for diversification at QLogic, which has carved out a major chunk of the host bus adapter, alongside Costa Mesa-based Emulex Corp.
Host bus adapters connect servers to the rest of a storage area network. The networks secure, organize, store and retrieve the growing reams of data at the corporations, banks, universities and governments.
Demand Growing
Demand for storage area networks are growing as companies accumulate more data.
The switches that QLogic sells are called fabric switches. They connect computers in storage area networks, helping manage and direct huge data flows.
These switches can have four or eight ports to more than 500 ports on the high end, providing the “core” switches in large networks. The switches QLogic sells are low to mid-range, with up to 128 ports or so. These switches help connect smaller networks. Also, they can be “stacked” to form a larger switch hub.
Franz said QLogic will continue to expand its offerings. In another strategy twist, QLogic is looking to sell more switches directly to computer makers, instead of via installers of storage area networks.
EMC Deal
The company recently landed a deal with EMC Corp., one of the biggest players in storage area networks.
The opportunity for sales through EMC and other makers is “fairly significant,” Franz said.
QLogic isn’t the first to try to make waves in the switch market. Others have tried and failed, Karp said.
“The landscape is littered with the corpses that tried,” he said.
The engineering behind fabric switches just isn’t easy. Getting them to work correctly at a good price takes more than chutzpah, Karp said.
“QLogic has a much better chance than anybody else,” he said. “They have a decade long experience in dealing with fibre channel. They have very sound technology.”
The company can point to its move into host bus adapters several years ago. At that time, former parent Emulex dominanted. The two now basically split the market.
Cisco moved into optitical switches that beam data as light back in early 2003. It quickly become a force, Dell’Oro said.
Cisco’s gains in the market in the past three years helped push Brocade to acquire McData, according to analysts.
