Orange County is on the front line of a brewing battle among networking-equipment makers that view 10-gigabit Ethernet connections as the next lucrative segment of the data center market.
The mix includes new and established companies based here, with Emulex Corp., Broadcom Corp., QLogic Corp. and Solarflare Communications Inc. all staking claims for portions of the business. They are expected to face stiff competition in coming years from the likes of Intel Corp. in Santa Clara and Round Rock, Texas-based Dell Inc., among others.
Fighting
They’re all fighting for a growing line of business, as 100 million 1-gigabit connections are projected to upgrade to 10-gigabit in the next five years. The shift holds the potential to generate an estimated $6.5 billion in revenue, according to Tam Dell’Oro, founder of Redwood City-based market tracker Dell’Oro Group Inc.
“It’s still in the very early days,” Dell’Oro said.
10-gigabit Ethernet controllers and adapters connect servers to local area networks within data centers, speeding up the flow of information. Such technology is seen as an improvement over fibre-channel and 1-gigabit connections, which are prevalent in data centers today.
The shift to 10 gigabit has been slowed by higher costs, integration concerns, reluctance to change providers and patent litigation. That’s kept adoption rates at a modest pace even as capacity has surged in data centers and with the advent of cloud computing amid the proliferation of video and streaming data.
The hurdles are gradually clearing, as established providers of fibre-channel and 1-gigabit connections develop 10-gigabit products and others join the chase.
Aliso Viejo-based QLogic Corp., the market leader in fibre-channel adapters, entered the 10-gigabit race in 2008 with a converged network adapter. The product, which uses fibre-channel-over-Ethernet technology, delivers 10-gigabit connection speeds.
The company now has about 10% of the market, according to Dell’Oro research.
“Those that have trusted us on the fiber-channel side will transfer to 10-gigabit,” QLogic spokesperson Chris Humphrey said. “It’s an important part of our strategy.”
Costa Mesa-based Emulex, a strong competitor in the mature fibre-channel segment, has quickly grown its share of the 10-gigabit segment to a lead position. The company had almost 32% of the 10-gigabit market in 2011, up from 2% in 2009.
2007 Start
Irvine-based chipmaker Broadcom began shipping chips for 10-gigabit products in 2007 and now has more than a quarter of the overall market, thanks to its strength in blade servers. The small servers are designed to save space in data centers by housing multiple circuit boards, or blades, with their own computer, memory and hard disks. They account for about 15% of the overall data center market.
Broadcom and competitors now are aiming for sales of 10-gigabit chips and adapters for bigger servers, called racks and towers. They make up 85% of the data center market, offering the biggest potential for growth.
“The overwhelming majority in racks and towers is still 1-gigabit,” said Greg Scherer, vice president of server and storage strategy for Broadcom.
Some analysts expect 10-gigabit adoption in towers and racks to reach 40% by 2014.
A new line of Intel processor chips released earlier this month that promise faster connections and lower operating costs are another boost for 10-gigabit adoption in data center racks and towers, as well as virtual and cloud servers.
Solarflare
Irvine-based Solarflare expects an immediate sales lift from Intel’s new chips.
The company makes networking equipment such as adapters, controllers and circuit boards, which speed up data transfer and improve performance in servers, data centers and the cloud. Intel chose Solarflare as its exclusive launch partner to debut the new chips in London because its technology “shows off the product better,” Solarflare Chief Executive Russell Stern said.
Solarflare has carved out a niche in the last few years selling its speedy data networking circuit boards directly to banks, hedge fund managers, stock exchanges, brokerages and other financial services companies.
Stern said the Intel chip set combines with Solarflare’s latest product lines to improve message reliability rates and speed delivery, key ingredients in handling the influx of trading data on public exchanges and other financial systems.
The company has deals with the New York Stock Exchange, Nasdaq Stock Market and Chicago Board Options Exchange to embed technology designed to boost high-frequency trading. It counts more than 440 customers in financial services, including nearly every major bank with operations in the U.S.
Solarflare is an emerging player in the 10-gigabit market and grew its share to roughly 1% in 2011.
Court Ruling
A recent court ruling also could help open up the market.
The U.S. District Court for the Central District of California granted Broadcom a permanent injunction against Emulex this month that prohibits the computer products maker from infringing on a group of its patents for 10-gigabit Ethernet controllers, chips and switches—all key technologies for Emulex’s core business lines.
The March 16 ruling also requires Emulex to pay Broadcom a 9% royalty on products using those patents through June 2013.
The judgment could finally end the companies’ long-running legal battle, which has left some customers uncertain on pursuing upgrades through either company. The original lawsuit was filed in September 2009, shortly after Emulex rebuffed a final $912 million takeover offer from Broadcom.
