Brocade Outlines Market Plans

In a presentation to industry analysts today, Brocade Communications Systems Inc. (Nasdaq: BRCD) outlined its market plans, denied deeper layoffs, and stuck to its financial guidance.

Brocade plans to mine new opportunities in multiprotocol routing, blade servers, and entry-level switches. According to Brocades figures, none of these new markets are as big as its current sweet spot – the midrange enterprise segment – but they represent far more growth potential.

Brocade’s VP of marketing Tom Buiocchi says the company estimates its total addressable market for multiprotocol routers to hit $350 million by 2006, making it about 20 percent of the overall Fibre Channel switch market. He places the blade server market for switches at $162 million by 2006, and the entry-level switch market at $111 million in the same timeframe.

Buiocchi says industry sources expect blades to make up from 25 percent to 35 percent of server sales by 2007. "Those blades have to attach to something, probably SANs."

Buiocchi says Brocade has about an 80 percent share of the entry-level SAN switch market now, a segment he admits isn't very large. However, the company’s goal is to maintain a major share as the segment grows. Brocade switches are shipped with recently announced low-end SAN systems from Dell Computer Corp. (Nasdaq: DELL), EMC Corp. (NYSE: EMC), and Hewlett-Packard Co. (NYSE: HPQ) (see EMC, Dell Get Small With SATA and HP Aims to Dazzle SMBs).Brocade expects that the midrange SAN switch market should be $500 million by 2006, but with flat growth, since port count increases will be offset by price declines. The traditional Fibre Channel switch midrange and high-end segments will have an 18 percent compound annual growth rate (CAGR) between now and 2008, Buiocchi maintains.

Buiocchi didn’t give a projection for the high-end enterprise segment, but says Brocade has about 30 percent of the director switch market and hopes to pick up 10 points of share on director leader McData Corp. (Nasdaq: MCDTA) “as soon as possible.”

As for intelligent switches, Brocade also has no estimates there, because products in that segment probably won’t ship until late 2004 at the earliest, Buiocchi says.

In total, the CAGR for all Brocade's markets could swell to 30 percent with new segments added, Buiocchi asserts. When pressed for details, though, Brocade executives backed down, conceding they probably won't realize that 30 percent.

Brocade's growth projections mirror its product rollouts. Earlier this month, Brocade announced a multiprotocol switch that was its first product developed through its 2002 acquisition of Rhapsody (see Brocade Ships Multiprotocol Router). Last month, the company announced a deal to provide custom SAN switches to be implemented as blades for servers from IBM Corp. (NYSE: IBM) (see IBM, Brocade Tie SAN Knot).Brocade addressed a range of other issues in its analyst day presentations: