QLogic Pulls a Switch Deal

Looking to diversify its revenue source and make a splash in the low-end Fibre Channel switch market, QLogic Corp. (Nasdaq: QLGC) has secured one OEM deal and is believed to be close to others for its SANbox switches.

A spokesman for Hewlett-Packard Co. (NYSE: HPQ) has confirmed that HP will offer QLogic switches along with Brocade Communications Systems Inc. (Nasdaq: BRCD) switches in its low-end HP StorageWorks Modular Smart Array 20 (MSA 20) systems later this year (see HP Tailors SANs for SMBs). Sources say another deal is in the works for QLogic to provide the sole switch on a second, unspecified HP storage system.

QLogic is also believed to have a good shot to close a deal with Dell Computer Corp. (Nasdaq: DELL) to sell SANBox switches on the AX 100 entry-level SAN. Brocade, currently the sole provider of switches on the MSA 20 and AX 100, would be the loser in both QLogic deals (see EMC, Dell Get Small With SATA.

We believe QLogic is applying significant pressure at HP and Dell,” says financial analyst Thomas Curlin of RBC Capital Markets. “At a minimum, we expect further price concessions from Brocade to secure share."

Another storage analyst says Brocade probably already made concessions to remain part of the HP deal to save face. “It’s a good testament to QLogic as they increase their presence with HP and other major OEMs,” says the analyst, who asked to remain anonymous. “Historically, HP has been Brocade’s largest OEM, so maintaining a presence with HP is critical, as it would have been a tremendous blow to Brocade to lose at HP.”