Is Brocade's SilkWorm Losing the Thread?

Doubts are growing over whether Brocade Communications Systems Inc. (Nasdaq: BRCD) will be able to start volume shipments of its new SilkWorm 12000 2-Gbit/s SAN switch by the end of the year, less than a week after saying that it would meet that deadline (see Brocade Hits Numbers).

Since then, Andrea Grosz, storage analyst with First Union Securities, has discovered that beta trials of the multiprotocol director-class switch are running late.

They should have started in June and they havent started yet. “We’re in the third week of August and it’s still not in beta. That leaves the company with an awful lot still to do between now and the end of the year, which is when it’s expected to ship,” she says.

Once Brocade ships the beta version to OEMs, these companies then have to test and qualify it with their equipment as well as train sales people. “Being generous, this will take three months,” says Grosz, “There’s a high probability they won’t make the time frame -- and the market will not look favorably on this.”

“Moving up market is always a hurdle, and this is what Brocade is trying to do with the 12000... It’s expected there will be a month to two months delay and the stock will be punished for this,” says Harsh Kumar, storage analyst at Morgan Keegan & Company Inc. “But it won’t be a total disaster for Brocade."Other evidence pointing to possible development problems at Brocade have cropped up in a couple of other contexts.

First, Brocade has declined to submit products for evaluation in Byte and Switch’s planned bench-marking test of 2-Gbit/s switches scheduled for the end of September. “The engineers tell me they just won’t be ready,” says David Newman, president of Network Test Inc., the bench-marking and network design firm managing the test.

Newman has been in negotiations with Brocade for several weeks in an effort to get them to participate. Two of Brocade’s competitors –- QLogic Corp. (Nasdaq: QLGC) and Vixel Corp. (Nasdaq: VIXL) --are already shipping 2-Gbit/s switches, and have agreed to participate in the test.

Of course, Brocade may consider it more important to get its first products into beta trials with OEMs. “If you are not a large OEM, you’re not going to get one,” says Laura Conigliaro, analyst with Goldman Sachs & Co.

Similarly, Brocade’s refusal to join a 2-Gbit/s developers' forum that launched this week (see QLogic Forms 2-Gig FC Group) “is not necessarily a sign of Brocade not having a product,” says Grosz. “It’s more the way it does business.” (Nice!)The forum aims to ensure interoperability between products, which could be bad news for Brocade because it makes it easier for competitors like Qlogic to displace Brocade equipment -- and that not only eats into its market share but also drives down its potential profit margins.

Of course, Brocade wouldn't want to say such a thing in public. It's also keeping quiet about possible delivery delays of its SilkWorm 12000 switch. At press time, it hadn't responded to requests for clarification.

— Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com