McData's recent shopping spree shows how the storage network business is consolidating, and also does a good job of positioning the company to compete with the likes of Brocade and Cisco. In one week it picked up Fibre Channel-over-IP specialist Nishan Systems, high end Fibre Channel switch developer Sanera, and 16 percent of Aarohi, which supplies key silicon for McDATA's upcoming line of intelligent switches.
The deals look good for users of all the hardware involved. McData was already working with Nishan and will now be able to build Nishan's storage-over-IP technology into its switches. The $102 million Sanera purchase will enable McDATA to provide scalable 256-port switches (which it calls directors) sooner than it would otherwise have managed.
"It gets us where we're going much faster," says McData's European marketing boss Dave Slater. "The Sanera box shares a lot of its architecture with our Intrepid directors, for example a cross-bar architecture and blades, so it will become our Sanera class of backbone directors.
"We can't say how long it will take to integrate with our Intrepid range, but the goal is to have them all forward and backward-compatible, adding things such as FICON support, probably before the end of 2004."
Nishan too fits in well with McData's multiprotocol ambitions, Slater says, as it can interlink multivendor Fibre Channel SANs both within sites and over IP WANs. He adds that the $83m deal gives Nishan's products a wider channel to market and should make them more acceptable to risk-averse corporates.
From the perspective of existing Nishan and Sanera users, the acquisitions promise long term support and product development. Both were start-up companies funded by venture capital and without a deal like this their future was uncertain.
The third leg of McData's new stool is the $6m stake in Aarohi. It gives a seat on the board and an insight into future developments, according to McData product manager Matt Vawter. He adds that Aarohi's processor chips let McData build intelligent switches that software partners can port virtualisation software to, and that Aarohi technology will go into a blade for the Sanera directors.
McData's rivals say that at best the acquisitions merely bring it up to par with them, and they do have a point. The acquisition of 256-port director and SAN over WAN technologies mirrors the merger earlier this year of Inrange (256-port directors) and CNT (SAN over WAN).
[Interestingly, CNT also had an OEM deal with Sanera but chose to buy Inrange instead, not least because the latter's products were already shipping and it had established sales channels which CNT could add to its own.]
Similarly, Cisco got the SAN/WAN stuff by buying NuSpeed and has already moved into Fibre Channel directors via its acquisition of Andiamo, while Brocade purchased Rhapsody to gain that important intelligent switch technology.
Nevertheless, McData appears to have struck some excellent deals here, paying cash in a tight market and getting good prices as a result. They bring it some significant new technology, although it now faces the big challenge of integrating that and the people behind it.
Slater says there is no plan to move Sanera and Nishan from California to McData's HQ in Colorado. He points out that McData already has a base in Silicon Valley, near its latest acquisitions, thanks to its earlier purchase of storage management software house SANavigator. Tthe new operations will move there.
"This shows we are not a Fibre Channel-only company," he adds. "It lays the groundwork for us to diversify away from Fibre Channel and create revenues from other products."