Network Computing is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


With a one-two punch of savvy acquisitions, McData Corp. (Nasdaq: MCDTA) has leapfrogged to the forefront of the SAN switching marketplace.

McData's opportunistic, all-cash deals for Sanera Systems Inc. and Nishan Systems Inc. give it an injection of expertise in high-scale Fibre Channel switching and IP that will help it match or exceed – the SAN switching offerings expected out of Cisco Systems Inc. (Nasdaq: CSCO) and Brocade Communications Systems Inc. (Nasdaq: BRCD). Wall Street generally hates the deals because there's not going to be immediate payback, but McData is thinking long-term strategy here (see McData Sweeps Up Nishan, Sanera and After Buying Spree, McData McDrops).

By patiently watching and waiting [ed. note: yes, like the cunning arctic fox on the prowl], McData clearly got the best end of these deals. On the other side, the venture capital firms backing Nishan didn't see a return on their investment, as McData's purchase price for Nishan ($83 million in cash, plus assumption of $2 million in debt) was below the amount its VCs had invested (around $100 million). Sanera's VCs actually fared much better: The startup had received around $76 million to date from its backers (with a commitment of an additional $25 million), and McData paid $102 million, an amount that does not include the approximately $10 million cash on hand Sanera has.

In the end, Nishan and Sanera realized their best option was to cut their losses and join up with McData. They each bring McData key pieces of technology that it will use to expand its portfolio both upmarket as well as down:

  • Sanera has demonstrated the highest-scale, highest-performing, multiprotocol core storage networking switch out there. The 256-port Sanera DS10000 switch beats Cisco's MDS 9000 and Brocade's SilkWorm 12000 on scaleability and performance; and its dynamic partitioning feature even outdoes the capabilities of Cisco's Virtual SAN technology (see Sanera Turns On the Juice). The challenge for McData will be to "McData-ize" this switch; the company is giving itself until the second quarter of 2004 to complete this process.
  • Nishan developed the industry's original Fibre Channel-to-IP gateway. The Nishan products compare favorably to the Cisco storage networking routers, and will allow McData to add IP extensions to its Fibre Channel switches. McData is also now able to compete with CNT (Nasdaq: CMNT) and other SAN extension equipment vendors.

Now, on the third leg of its next-gen product strategy, McData has invested in storage processor startup Aarohi Communications, whose chips it will use to develop an "intelligent switch platform." The story here is still a bit murky, but McData has indicated it will let its OEMs decide what applications they want to run on the switch (mimicking Brocade's posture).

  • 1