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Brocade Greases EMC's Palms

Brocade Communications Systems Inc. (Nasdaq: BRCD) used several aggressive sales tactics during its second quarter to try to gain share in the Fibre Channel switch market, including unusually generous sales incentives for EMC Corp. (NYSE: EMC) sales reps, according to several industry sources.

Brocade's sales push was designed to move its high-end SilkWorm 12000, which has faced stiff competition from McData Corp. (Nasdaq: MCDTA) and is now starting to vie with Cisco Systems Inc. (Nasdaq: CSCO).

As part of its strategy, Brocade was offering EMC system engineers (SEs) a "spiff" -- essentially, a kickback -- of $250 for each 16-port blade sold in the quarter, according to a source familiar with EMC. That amounts to a $2,000 spiff per 128-port dual-switch Brocade 12000 sold; the program topped out at $8,000 per sales rep for the quarter that ended in July. Another source says the spiffs have been extended through the October 2003 quarter. [Ed. note: A few disappointed EMC guys were expecting $2,000 spliffs.]

The program appears to have been specifically aimed at EMC; a source says that Brocade did not offer Hitachi Data Systems (HDS) reps, for example, the same incentives. EMC is the leading supplier of SAN infrastructure gear in the market, accounting for as much as two thirds of director-class switch sales (see EMC Holds Off on Cisco).

Industry observers say that while spiffs are very common, those reportedly offered by Brocade to EMC's SEs were well above the industry norm. "It shows they know their back is against the wall," says an executive at a major storage systems company. Brocade's other promotional efforts for the 12000 have included "buy two, get two free" deals, an offer one source characterized as "irrational."

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