Jim McCluney, CEO, Emulex

"We're still out there looking for companies that have good technology that can propel us to our billion-dollar goal."

December 19, 2006

5 Min Read
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Former Vixel CEO Jim McCluney took the reins of Emulex in September, and within less than two months had outlined a new strategy for the firm. (See McCluney Takes Reins and Emulex Claims HBA Spot.) The exec is now re-focusing the HBA vendor's energies on host server products, embedded storage, and networking. (See Emulex 'Re-Positions'.)

Initially, at least, this strategy appears to be working. "We needed to get into some customers that hadnt bought from us before, and we did that," McCluney told Byte & Switch.

The Scot took the Emulex helm at a time of consolidation in the switching and HBA markets. Rival QLogic, for example, thanks to its Silverstorm acquisition, has strengthened its links with Cisco. (See QLogic Inches Closer to Cisco.) And Brocade's $713 million acquisition of McData is seen as further consolidating the lower-end switch market. (See Brocade Bags McData For $713M, Brocade's Costly Victory, and McData Hops on QLogic Blades.)

Brandishing a new logo to emphasize its refreshed profile, Emulex has waded into the fray. It's chased partnerships, recently teaming up with VMware to offer its LightPulse Virtual HBA technology within the virtualization giant's Infrastructure software. (See Emulex Teams With VMware, Tales From the Virtual Crypt, and Emulex Beefs Up Virtualization.)

The vendor has also been busy with M&A, buying Sierra Logic, which makes Fibre Channel-to-SATA bridge routers, for $180 million, and also grabbing chip virtualization specialist Aarohi for an undisclosed fee back in April. (See Emulex Gets Sierra Logic and Storage Do-Si-Do.)Byte & Switch sat down with McCluney in New York this week to talk virtualization, 10-Gbit/s Ethernet, and further acquisitions.Next Page Interview

Byte & Switch: You recently announced your intention to refocus Emulex on host server products, embedded storage, and networking. What does the roadmap look like?

McCluney: We're looking at other technologies like virtualization, security, and encryption, that we will put across our entire product set.

We have the [virtualization] capabilities now through [our] Aarohi [acquisition]. We’re going to take that and embed the same technologies into our I/O products, as well as working with OEMs to provide simple appliances that [users] can use to drive virtualization. They will be little servers that will have our chips embedded in them and low-cost storage processors to port your software of choice to.

On security, we're working with standards committees and the server and storage OEMs to make sure the technologies we're building into our next-generation chips meet their data protection requirements. This is for both data at rest and on the move.Our OEMs are driving us to have 8-Gbit/s products available to them by the end of '07 -- all of the blue ribbon server and storage guys. Most of the server and storage people will take a year to test these things out.

Byte & Switch: On the subject of virtualization, the first products based on your partnership with VMware are expected next year. How is that progressing?

McCluney: It's progressing extremely well. We’re planning an upgrade in the first half of '07. We're working on things like encryption for virtualized environments.

Byte & Switch: After buying Vixel, Aarohi, and Sierra Logic, it seems like you're on a tear. What does Emulex's acquisition strategy look like going forward? (See Emulex Completes Vixel Acquisition, Emulex Secures Sierra Logic, and Emulex Buys Aarohi.)

McCluney: Our overarching goal of growth is to get the company to billion-dollar revenue by the end of the decade. We're still out there looking for companies that have good technology that can propel us to our billion-dollar goal.I think that it will be a little while [before further acquisitions] because we are still absorbing these other companies. We made three acquisitions in three years -- I can't predict that we will be doing that again.

Some of our acquisitions could be in software management or other adjacent technologies that could add to our portfolio. People need to make their data more mobile, but they also need to make it more accessible and more secure.

We just spent $160 million for Sierra Logic, and that left us net cash of $250 million. We generated $50 million in cash in the September quarter, so we're a good cash machine.

Byte & Switch: How do you see the 10-Gbit/s Ethernet and Fibre Channel markets shaping up over the next few years?

McCluney: We will have [a 10-Gbit/s Ethernet HBA] product available before 2008. With VOIP and Video on Demand there's phenomenal demand for increased bandwidth.We believe that with lowering costs of 10-Gbit/s Ethernet, over time it can open up a market similar to what Fibre Channel did for storage memory. The Aarohi next-gen silicon which is due out next year will give us a platform to provide high performance offload for 10-Gbit/s Ethernet. We will take all the technologies that we have built into the Fibre Channel HBAs and build them into our Ethernet HBAs.

[Fibre Channel] has got very, very entrenched in most of the data centers -- people trust it to manage their storage. It's a more mature market, but it's not growing the way it was four or five years ago.

I think with the emergence of 10-Gbit/s Ethernet, there will be some cannibalization, although we see it as compatible with Fibre Channel -- there's various techniques to bridge Fibre Channel over IP networks.

Byte & Switch: Your rival QLogic has put its faith in InfiniBand. Do you have any plans to support the technology? (See QLogic Showcases Platform and QLogic Eyes SilverStorm.)

McCluney: We looked at it and we think that it will be a good niche and vertical market [product] -- it's finding a great place in clustering and High Performance Computing (HPC). Our focus is more on where the broader market is going, hence our investment in Ethernet. We have no InfiniBand plans at the moment.Byte & Switch: What other trends are you seeing?

McCluney: The 4-Gbit/s ramp has been faster than we anticipated. In the September quarter, 41 percent of our revenues were from 4-Gbit/s [products]. That included embedded switches and processors. We think that by the end of this quarter, it will be over 50 percent.

— James Rogers, Senior Editor, Byte and Switch

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