McData Puts Muscle Behind Storage Networking Effort

Broomfield, Colo.-based McData, which provides Fibre Channel switches and other hardware, software, and services for enterprise-class SANs, is acquiring Nishan Systems for $83 million in cash and $2 million in assumed debt. Nishan brings iSCSI, iFCP (Internet Fibre Channel Protocol) and FCIP (Fibre Channel over IP) technology to McData.

McData is also paying $102 million for Sunnyvale, Calif.-based Sanera Systems, a developer of Fibre Channel SAN storage directors with up to 256 2-Gbps ports or 64 10-Gbps ports.

McData's $200 Million Bet


How it's allocated and what the company gets in return


>> Acquiring Nishan for $85 million. Gets iSCSI, iFCP and FCIP technology, as well as a customer and channel base.
>> Acquiring Sanera for $102 million. Gets Fibre Channel SAN storage directors with up to 256 2-Gbps ports or 64 10-Gbps ports.
>> Invested $6 million to purchase 15 percent of Aarohi Communications, a developer of silicon solutions for intelligent storage networks.

In addition, the vendor is investing $6 million in Aarohi Communications, a San Jose, Calif., developer of solutions for adding intelligence to storage networks.

David Stone, executive vice president at Solutions-II, a Littleton, Colo., McData solution provider, said that while McData and rival storage vendor Brocade Communications Systems, San Jose, have been SAN leaders, they need to find ways to combat Cisco, which,although a relative newcomer to storage,is the IP switch leader and knows how to drive port costs down.

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Stone said McData also knows it faces increasing competition from Cisco in the high-end data center storage space.

Mike Gustafson, vice president of worldwide marketing at McData, said San Jose-based Nishan brings McData multiprotocol networking capabilities, including routing to connect heterogeneous SANs, long-distance heterogeneous SAN connectivity regardless of customer size, and iSCSI to drive low-cost storage networking to the SMB space.

Sanera, on the other hand, gets McData into the high end of the director-class switch market sooner than planned, he said.

Carl Wolfston, director at Headlands Associates, a Pleasanton, Calif.-based solution provider and Brocade partner, said Nishan will put McData squarely in Cisco's storage space at the expense of Brocade. "It's a three-horse race, and McData will make sure it stays a three-horse race," he said.

For instance, a typical FCIP project now costs $40,000 to $80,000 for solutions from vendors such as Minneapolis-based CNT, Wolfston said. However, Cisco is planning to unveil a $10,000 to $15,000 blade for its switch to do FCIP.

Nishan gives McData the same capability. Brocade, like McData, had certified Nishan for use with its switches for FCIP, said Wolfston. "Cisco will have FCIP, now McData will have it too," he said. "Where does that leave Brocade?"

The iSCSI situation is similar, where Cisco has an iSCSI blade and McData will have Nishan but Brocade won't be represented, Wolfston said. "If a Brocade customer asks for iSCSI, Brocade will probably tap dance around the customer to say he doesn't need iSCSI," he said. "Or Brocade will have to buy iSCSI from someone else."

About 50 percent of McData's products go either directly to solution providers or via OEMs to solution providers, according to Gustafson. A little less than 50 percent go via OEMs direct to their customers, he said.