Cisco Lays Off NuSpeed Team

Byte and Switch has learned that Cisco Systems Inc. (Nasdaq: CSCO) has laid off the majority of its storage router business unit, which hails from NuSpeed Internet Systems, the iSCSI router company Cisco acquired for $450 million in July 2000 (see Cisco to Acquire NuSpeed Internet).

About 50 of the 65 Cisco employees that started with NuSpeed were given pink slips yesterday, according to an insider familiar with the situation. "There's a small cadre of around 15 people who are going to stick around," the source says.

Cisco issued the following statement: "As a normal course of business... Cisco reallocates resources around the company to focus on profitable areas of our business. As this occurs, there may be very limited restructuring in some groups." The company refused to comment specifically on the cuts in the storage router division, which is based in Maple Grove, Minn.

The decision to axe this team has been expected for some time, and it became even more likely when NuSpeeds founders, Mark Cree and Clint Jurgens, resigned in January (see NuSpeed Duo Departs Cisco).

Cisco's rationale for laying off the rest of the team seems clear. NuSpeed faced a gamut of problems, economic and political, from the moment it was acquired by Cisco. Apparently, it was never able to overcome them.On the political front, Cisco had two separate engineering teams developing storage networking technology at the same time. The Andiamo Systems Inc. bunch were much closer to Cisco’s headquarters [ed. note: slap-bang in the middle, actually!] and had a much more influential position within Cisco than did the NuSpeed team. Analysts say this left the NuSpeed group pretty much isolated in the North Woods.

Throw in the lousy economy and the resulting lack of adoption of iSCSI, and the NuSpeed crew never really had a chance, observers say.

To cut Cisco some slack, "iSCSI was advertised as a potentially disruptive SAN transport at the time of Cisco's acquisition of NuSpeed," says Steve Denegri, managing director of system area networking research at RBC Capital Markets. "But given iSCSI's slow adoption rate, which can largely be blamed upon weaker economic forces, the choice to downsize the NuSpeed team was expected."

When you boil it down, IP storage wasn’t the slam-dunk Cisco was expecting, and it still has to prove itself as a storage interconnect. "I think that, while [NuSpeed] is a $500 million shame, iSCSI will play a big role inside Cisco one way or another," says Steve Duplessie, founder and senior analyst with the Enterprise Storage Group Inc.

In the meantime, Cisco needs to establish a presence in storage networking now if it hopes to be a major contender when IP SANs eventually come of age, analysts say. Its MDS 9000 series Fibre Channel switches and directors are an attempt to hammer a stake into the ground today (see Cisco Announces Andiamo Switches).Cisco notes that it will continue to invest in IP storage networking products [ed. note: just not today]. The company will extend its SN 542X router line (from NuSpeed) and plans to introduce an interoperable IP storage services module for the MDS line, expected the first half of 2003.

But for EqualLogic Inc., Eurologic Systems, LeftHand Networks, Nishan Systems Inc., StoneFly Networks Inc.