InfiniSwitch Merges Lanes

Consolidation among the InfiniBand startups is underway as switch vendor InfiniSwitch Corp. and management software firm Lane15 Software announced today that the two companies will merge (see InfiniSwitch and Lane15 Merge).

In January, Byte and Switch first reported that the two InfiniBand survivors were in talks about a merger (see InfiniBand Merger in Play?).

The combined organization will operate under the name InfiniSwitch. Alisa Nessler, CEO and president of Lane15, will become CEO of the new company, replacing Don Zereski, former CEO of InfiniSwitch, who will take on an independent consulting role.

As part of the merger, InfiniSwitch announced the completion of an additional $10 million in venture financing, bringing the total cash balance of the combined company to $20 million. It expects this to last 18 to 24 months, by which time it hopes to be profitable.

Current investors in InfiniSwitch and Lane15 include: Austin Ventures, Bessemer Venture Partners, Columbia Capital, Convergent Investors, Flagship Ventures, Index Ventures, Lightspeed Venture Partners, Moore Capital Management Inc., and TL Ventures. Strategic investors include: Dell Computer Corp. (Nasdaq: DELL), Hewlett-Packard Co. (NYSE: HPQ), Intel Corp. (Nasdaq: INTC), and Quanta Computer in Taiwan. Rob Adams, of Austin Ventures, and Bernard Dalle, of Index Ventures, were elected new members to the board of directors.

The companies said there were no layoffs in conjunction with the merger, as both had already trimmed their headcounts in expectation of the deal. The final headcount stands at roughly 60 employees. Lane15 will maintain its office in Austin, Texas, and InfiniSwitch will stay put in Westborough, Mass. (see InfiniBand: Take One Layoff and Wait).

The merger -- in the works since the fall of last year -- comes at a critical juncture for the InfiniBand market. Potential OEMs of this technology, including Dell, IBM Corp. (NYSE: IBM), and Sun Microsystems Inc. (Nasdaq: SUNW), among others, are said to be on the cusp of releasing InfiniBand-enabled products (see Sun Hugs InfiniBand and Server Vendors Hold IB Pep Rally).

InfiniSwitch VP of marketing Terry Dickson says two key factors that were previously stalling the process have now been overcome. "There was a lack of stable silicon, and the solutions weren't integrated enough," he says. "We definitely heard from our target customers that they wanted an integrated hardware and software solution, not piece parts." In addition to its switches and software, InfiniSwitch resells Mellanox Technologies Ltd.'s InfiniBand host channel adapters (HCAs).

Regarding OEMs, Dickson says InfiniSwitch expects to make its first announcement next month. Given that both companies have been working furiously on a relationship with IBM, a deal with Big Blue seems possible, although the server giant may have its eye on Sanmina-SCI Corp. (Nasdaq: SANM), as well (see Lane15 Works With IBM and Sanmina Relights InfiniBand Fire).

Dickson adds that Dell, Fujitsu Ltd. (KLS: FUJI.KL), Hitachi Data Systems (HDS), HP, Network Appliance Inc. (Nasdaq: NTAP), and Sun are all potential customers for InfiniSwitch.

All that needs to happen now is for end users to finally buy into InfiniBand, which most analysts think will be adopted as a clustering technology and will not have much impact on the storage industry.

"Basically, storage and InfiniBand is not a match made in heaven," says David Hill, analyst at Aberdeen Group. The firm believes that Fibre Channel and iSCSI are, respectively, the incumbent and future networking technologies for the storage market.

For the remaining InfiniBand companies, merging or getting acquired before they run out of money would be preferable at this stage. "More consolidation among the smaller players is on the way, as everyone hunkers down to ride out the uncertainty in the marketplace," says John S. Webster, senior analyst and founder of the Data Mobility Group.

A spokeswoman for InfiniBand switch startup Topspin Communications Inc. says the InfiniSwitch/Lane15 merger confirms the market need for integrated products that include an embedded subnet manager in every InfiniBand switch. "The business model for selling a standalone subnet manager is not sustainable... If the two companies can survive the challenges of a merger, they've done the right thing," she says.

Jo Maitland, Senior Editor, Byte and Switch