Blade Network Gets Funding From NEC, Juniper

data center networking

The privately held Santa Clara, Calif.-based developer of embedded and top-of-rack networking and converged networking switches also opened its financial kimono slightly to report strong sales and profit during its fiscal third quarter of 2009.

Blade Network's Series B funding totaled $10 million and was led by three new investors including Japan-based NEC, switch maker Juniper Networks and a third vendor that declined to be named, said Vikram Mehta, president and CEO.

The new investment follows Blade Network's Series A funding round in 2006, which gave the company seed money of $30 million, and gives it a current market capitalization of $240 million, Mehta said.

Blade Network develops enterprise-class Gbit Ethernet and 10-Gbit Ethernet switches and was the first to ship Converged Enhanced Ethernet, or CEE, switches, said Mehta.

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CEE is the official IEEE name for what is also commonly called Fibre Channel over Ethernet, or FCoE, which allows both IP networking and storage networking data to travel over the same network, he said.

The company's products come in two form factors. About 80 percent of its sales are embedded switches, which are sold to OEM customers, the largest of which is IBM, but also includes Hewlett-Packard, NEC, Verari Systems and others, Mehta said.

The second is a series of top-of-rack switches that are sold via IBM and its channels or to solution providers via distributors such as Bell Microproducts.

Blade Network was the first to ship CEE switches and to date is the only vendor to sell blade-type CEE switches, Mehta said. At last week's VMworld, it showed CEE working in a virtual environment with converged network adapters from Emulex and the capability of moving network switch connections with virtual servers using VMware's VMotion capability, he said.

While Blade Network is currently very profitable and is looking at a yearly revenue rate of about $100 million for all of fiscal year 2009, the company is planning to use the new investment to expand its sales channels in the U.S., Europe and China, and gain sales footprints in fast-growing markets such as India and Brazil, Mehta said.

It is also expecting to work with channel partners to compete against Cisco's Unified Computing System, or UCS, strategy, he said.

Cisco's strategy seeks to combine compute, storage, virtualization and networking capabilities in an integrated package that the company has said will make data centers more flexible, efficient and cost-effective.

However, because the UCS strategy also includes the introduction of server blades by Cisco, that vendor is now in the position of competing against its former system vendor partners including IBM and HP.

That is not a strategy Blade Network will employ, Mehta said. "We don't pit our channel against IBM's or HP's channels, which is what Cisco is doing with its UCS strategy," he said.

Since its founding, Blade Network has managed to grab a 7.9 percent share of the 10-Gbit Ethernet switch market in terms of ports shipped, following only Cisco and HP ProCurve, Mehta said, citing data from Dell'Oro Group.

This is despite having a tiny share of the overall networking switch market, as the company only focuses on enterprise data center customers, he said.

Mehta declined to discuss any potential technology deals between Blade Network and Juniper, which also plays in the enterprise data center networking market, other than to hint that anything is possible.

"Watch this space," he said. "That one will have to wait until we make something public."