Cisco's Gained Ground, Says Report

McData slips, while QLogic picks up at Emulex's expense, according to research firm Dell'Oro

August 27, 2004

3 Min Read
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In what could further stir controversy over the performance of Cisco Systems Inc. (Nasdaq: CSCO) in the Fibre Channel switching market, research firm Dell'Oro Group says Ciscos revenue has grown in double figures, mostly at the expense of McData Corp. (Nasdaq: MCDTA).

Cisco’s SAN switch revenue grew 20 percent, McData’s revenue dropped 8.5 percent, and Brocade Communications Systems Inc. (Nasdaq: BRCD) gained 2.3 percent, the research firm says. The results were similar to last quarter when Cisco rose 18 percent, McData dropped 7 percent, and Brocade edged up 2 percent (see Report: Cisco SANs Grew 18% and SAN Market Revenues Slip).

According to the report’s author, Dell'Oro principal analyst John Carvell, Cisco performed strongly in the enterprise space while McData got hurt by a product transition.

"Cisco continues to gain traction in large enterprise accounts,” Carvell says. "McData's FC switch revenues declined in part because of softer demand for its [director switches] in anticipation of the launch of its new Intrepid 10000.”

McData plans to launch the Intrepid 10000 by the end of the year.Cisco finished the quarter with 14.5 percent share of the overall SAN switch market and 21.6 percent of the director market, by Dell'Oro's reckoning. Cisco’s biggest gain came in the director space that McData has long dominated. Cisco picked up 3.8 percent share while McData dropped 4.1 percent but continues to lead the segment with a 42.7 percent share.

Dell’Oro’s second quarterly SAN report also identified QLogic Corp. (Nasdaq: QLGC) as the big winner over its HBA rival Emulex Corp. (NYSE: ELX).

QLogic’s HBA revenue increased 16 percent over the previous quarter. QLogic pushed past its main HBA rival Emulex in port counts and matched it in revenues for the first time, according to Dell’Oro. Emulex’s revenue fell 9 percent from the first quarter.

Dell’Oro’s figures are in line with the switch and HBA vendors’ recent earnings reports, although the switch makers’ fiscal quarters don’t exactly follow the calendar year. Brocade, Cisco, and McData’s quarters ended in July while Dell’Oro tracked the second calendar quarter ending in June.

In its earnings report, Cisco refused to divulge specific revenue figures for storage, but reported a 41 percent sequential growth in the segment (see Cisco Storage Stays Mysterious). This compares with a 3 percent increase for Brocade and 1 percent increase for McData (see Brocade Cautious About Growth and McData Stays Out of the Red).Emulex and QLogic’s earnings periods follow the calendar, so the HBA results come as little surprise, given Emulex’s rough financial results. Emulex, hurt by a poor quarter from its major OEM, Hewlett-Packard Co. (NYSE: HPQ), reported a 13 percent sequential drop in earnings (see Emulex Cuts Guidance, Jobs). QLogic reported a 1 percent growth in revenue from the previous quarter (see QLogic Qloses Quiet Quarter).

"It appears that QLogic has overcome its channel inventory realignment challenges, but Emulex is still grappling with this issue," says Carvell.

Emulex says it expects the channel inventory problem to continue this quarter when one of its major storage systems partners -- believed to be EMC -- changes to a hub-based inventory management process that will defer income to next quarter.

— Dave Raffo, Senior Editor, Byte and Switch

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