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FC Market Gets Rattled

Cisco's SAN push and other factors are shaking up the status quo, says latest B&S Insider report

The Fibre Channel market is in the midst of a shakeup that will reshape the winners and losers in the fast-growing SAN infrastructure space, according to Byte and Switch Insider's July report.

Until recently, the suppliers of Fibre Channel switches and host bus adapters have represented a comparatively insular segment. But now the SAN world is getting rocked out of its niche as FC becomes more widely deployed. More specifically, according to the report, Cisco Systems Inc.'s (Nasdaq: CSCO) initial SAN thrust is having a noticeably disruptive effect on the incumbent switch playing field dominated by Brocade Communications Systems Inc. (Nasdaq: BRCD) and McData Corp. (Nasdaq: MCDTA).

Cisco -- whose $19 billion in revenues last year is roughly 10 times the size of the entire FC market today -- is using a variety of aggressive tactics to win share, according to the Byte and Switch Insider report, "Fibre Channel Market Update." For example, in the second quarter Cisco quickly cut prices on its switches to OEMs as much as 50 percent after originally pursuing a "premium pricing" strategy, and is now offering deals in the sub-$1,000-per-port range as well as buying back users' existing SAN switches, the report says.

Questions remain about how well Cisco can continue to execute its SAN strategy, and the report cautions that it is very deliberately rounding up marquee accounts in an attempt to show traction (see Cisco & IBM Jam on SANs). Nonetheless, Cisco appears to be firing on all cylinders and defied naysayers by securing the four biggest storage systems OEMs in the first half of 2002: EMC Corp. (NYSE: EMC), Hitachi Data Systems (HDS), Hewlett-Packard Co. (NYSE: HPQ), and IBM Corp. (NYSE: IBM).

Another factor that could reshuffle the SAN deck is the rollout of 4-Gbit/s Fibre Channel SANs. QLogic Corp. (Nasdaq: QLGC), which has been the biggest promoter of the technology, stands to gain substantially if the industry moves in this direction. However, the report notes, many companies remain opposed to the interim stop at 4 Gig, including Brocade and McData (see FC Fires Up 4-Gig Fiesta).

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