2006 Storage Winners & Losers

There's no tying in storage - only winning and losing. Here's the record for 2006

December 23, 2006

7 Min Read
Network Computing logo

It's the time of year to look back and consider who in the storage world was nice -- and who was naughty.

In 2006 we saw more than our share of successes and failures. As in any year, youll recognize some perennials in both groups, but this year, a few entrees show up on the list you wouldn’t normally expect.

Without further ado, we present you with the biggest winners and losers in the storage world for 2006, starting with the Winners:

Brocade won its long battle with McData, buying its rival for $713 million to set up a head-to-head faceoff with Cisco for Fibre Channel switch supremacy. (See Brocade Bags McData For $713M.) This year, Brocade also rode the wave of being first out with 4-Gbit/s switches and managed to avoid negative fallout from the stock backdating scandal that resulted in the indictment of former CEO Greg Reyes and human resources VP Stephanie Johnson. For Brocade to be back in the winner's circle in 2007, it must hold off Cisco's 4-Gbit/s charge and see positive results from its WAFS and file management software. (See Brocade Bags NuView.)


Cisco was probably the major cause of McData's demise and will likely be its major benefactor. On the market share front, Cisco achieved two milestones in 2006: It moved ahead of McData into first place in directors and second overall behind Brocade in Fibre Channel switches. (See Cisco's First in Directors, Dell'Oro Says and 4-Gig Boomerangs on Brocade.) Cisco got a big push from its MDS 9513 4-Gbit/s director this year and could get the same from its 4-Gbit/s MDS 9124 in fabric switches in 2007. (See Cisco Goes 4-Gig & Big and Cisco Salvo in 4-Gig FC.) Cisco's switch success overshadows potholes it hit in other storage areas. The company had tepid WAFS sales and saw the end of its NAS OEM deal with EMC. (See Cisco Joins WAN/WAFS in Name Only and Cisco Kills EMC NAS Deal.)Data Domain

At the start of 2006, Data Domain was among a handful of vendors using an obscure technology called data de-duplication. Now it’s the leader in what has become one of the hottest storage technologies. Data Domain is almost certain to go public in 2007, unless one of the major vendors puts up big bucks for its de-duplication wares. (See A Data Reduction Dossier, Insider: De-Dupe Demystified, Symantec Dips Into De-Dupe, and De-Dupers Demand Disk Mindset.)

McData Execs
McData is paying CEO John Kelley and five other executives bonuses totaling around $4 million to make sure they stay until Brocade closes the deal, although Brocade probably won’t offer most of them permanent jobs. (See Kelley Gets 1.1M Reasons to Stay.) Kelley will receive more than $1.1 million if he remains with the company through completion of the acquisition. COO Todd Oseth is eligible for $740,000; CFO Scott Berman $568,750; engineering senior VP Michael Frendo $495,000; chief legal officer Thomas McGimpsey $495,000; and sales SVP Adrian Jones $410,000. The retention bonuses are an attempt to convince customers and shareholders of the Brocade and McData that there will be an orderly transition.


Besides impressively expanding its HBA business, QLogic put itself in position to benefit from McData’s demise by expanding its Fibre Channel switch footprint. QLogic added a low-cost director to its fabric switches and hopes to pick up OEM deals that would not have been available if McData had stuck around. (See QLogic Grabs Director's Chair.) QLogic also dropped $169 million on InfiniBand companies PathScale and SilverStorm in anticipation of the high-speed interconnect becoming more than a high-performance niche technology.(See QLogic Inches Closer to Cisco and QLogic Bets on InfiniBand

Venture Capitalists
Many of the brave souls who invested in storage during the post-bubble years cashed in this year. Riverbed, Isilon, CommVault, and Double-Take all hit or beat their price targets when they went public in 2006, and their share prices have risen since their IPOs. Several acquisitions also brought big returns. Purchase prices for Kashya, Avamar, XOSoft, Tacit, and PathScale were all at least three times the amount those startups received in funding. (See EMC Picks Up Avamar, EMC Coughs Up for Kashya, Storage Shopping Spree, QLogic Bets on InfiniBand, and Packeteer Picks Tacit.) That sets the stage for more IPOs or larger acquisition prices in 2007. Mellanox has already filed for its IPO, and EqualLogic, 3PAR, Data Domain, Compellent, and LeftHand Networks are among the growing list of hopefuls. (See Mellanox Ready for IPO .)

Next Page: LosersBook Cookers

Former Brocade boss Greg Reyes became the poster boy for the options backdating scandal when the feds charged him with fraud last summer, but he had plenty of company when it comes to creative accounting practices. (See Reyes Charged With Fraud.) AMCC, Broadcom, CA, Dell, F5 Networks, Network Appliance, Marvell Technology Group, and Vitesse were all involved in internal probes, SEC investigations, or shareholder lawsuits questioning their financial dealings. (See Vendor Options Draw SEC Scrutiny, Dark Days at Dell, and NetApp Sued Over Options.)

Relatively speaking, it was a rocky year for the biggest pure-play storage company. EMC had two rough quarters and two layoffs; investors tired of its incessant acquisitions; and customers grew impatient waiting for new technology to be integrated into its products. (See Tucci: EMC's Problems 'Self-Induced', EMC Hiccups, Waits for Clariion, EMC Grabs Hatchet, EMC Brags on Revs, Plans Cuts, and Did EMC Overpay?.) Still, EMC is in better shape than the rest of the loser brigade. After all, it has VMware.


Any gains HP made with its storage product line were lost by the snooping scandal that cost a few execs and board members their jobs and brought about a humiliating apology from CEO Mark Hurd and a $14.5 million payment to settle civil suits. (See Hurd Apologizes, Probe 'Disturbing' HP's Penance Pondered.) Although probably unrelated to the scandal, HP's storage sales also cooled off late in the year after a nice rally over the previous 12 months. (See HP Rethinks Storage Plays and Storage Hurts HP's Quarter

McData Rank and File
While McData execs will get bonuses to hang around, a lot of McData's staff anticipate pink slips after the Brocade deal closes. The $100 million cost "synergies" Brocade boasted of saving when announcing the deal mean hundreds of layoffs next year.

Overland Storage
Overland is looking for a CEO after sending Chris Calisi packing in November. (See Overland Names Interim CEO.) Whoever gets the job will need a big broom to clean up the mess. In the last 16 months, Overland lost a tape library OEM deal with HP that accounted for most of its revenue, screwed up a smaller but key OEM deal with Dell before ever getting products out, and acquired software startup Zetta Systems only to close down its operations. Perhaps it's not surprising that Overland lost $20 million last quarter. (See Overland's Woes Widen.) That doesn't give the next CEO much to work with.Revivio

The CDP pioneer went out with a whimper, selling off its IP to Symantec after failing to make it on its own. (See Symantec Swallows Revivio.) Trying to slug it out with the big boys instead of partnering killed Revivio, which found enterprise customers wary of turning over mission critical data to a startup. Revivio’s developers got absorbed into Symantec, but the investors took a bath. Symantec put up about $20 million for a company that had $55 million in VC funding. And much of the money Symantec paid went toward continuing support for Revivio's 12 customers.

Sun Microsystems
OK, so 2006 was no worse than usual for Sun storage. It wasn't much better either in the first full year since it absorbed StorageTek for $4.1 billion. Sun still hasn't figured out its post-StorageTek strategy, and the only disk products it seems to sell are the stuff that comes from Hitachi. (See Sun Shuts Door on VSM Open and Sun Opens Tape Again.) Sun also had a CEO shuffle and staff reductions in 2006. (See Schwartz Shakes Up Sun and Sun Takes Action Amidst Concerns.) Perhaps new storage chief David Yen can do some good, once he’s finished quieting rumors. (See Sun Storage Chief: We're Not for Sale.)

— Editors, Byte and Switch

Stay informed! Sign up to get expert advice and insight delivered direct to your inbox
More Insights