SBE 'PyX' Its TOEs

The acquisition by SBE Inc. (Nasdaq: SBEI) of iSCSI software maker PyX Technologies Inc. could be the start of something bigger than both companies.

There's no surprise in the merger. SBE, which makes multiport TCP/IP offload engine (TOE) cards and other kinds of adapters for IP-based gear, announced plans to buy PyX back in March (see SBE, PyX Merge). The surprise is that the two actually pulled it off, given surrounding conditions.

PyX was still in its earliest stages and had just one customer and five employees when it caught SBE's eye back in 2004. PyX specializes in iSCSI target software, which can make a device like a storage array responsive to standard iSCSI servers and other "initiators." While PyX has initiators for iSCSI, too, the company sees more market opportunity competing for OEMs outside of servers, as in the storage market. Last year, however, its only OEM was a surveillance firm.

SBE had more than 35 employees, and its main customers included , Hewlett-Packard Co. (NYSE: HPQ), and . But it had suffered big losses for months when it met up with PyX, despite its forays into voice-over-IP, blade computing, and AdvancedTCA (see SBE Scrapes By, SBE Switches CEOs, SBE Loses $2.3M in Quarter, and SBE Profits Dwindle). As of April 30, 2005, SBE was showing $1.7 million in quarterly revenue, down 43 percent year-over-year.

Despite the odds, about a month ago, SBE's shareholders agreed to spend about $11.8 million in stock for PyX, and the company raised an additional $5.1 million in a private financing round associated with the merger.On top of all this, PyX managed to score a licensing deal with LSI Logic Corp. (NYSE: LSI), which was a condition of the final merger (see LSI Logic, PyX Ink iSCSI Deal). A separate agreement between PyX and ONStor Inc. was recently finalized (see ONStor Gets iSCSI From PyX ).

Can PyX and SBE make beautiful music now that they've gotten together? While that remains to be seen, signs are good. The two share side-by-side offices in San Ramon, Calif., and Greg Yamamoto, former CEO and a founder of PyX, now heads up SBE's storage business unit. The other PyX founder, Andre Hedrick, who is a well known and respected Linux developer, is CTO of SBE.

Customers appear to be responsive. LSI Logic plans to demonstrate a subsystem using the PyX iSCSI target software and its own hardware at the LinuxWorld tradeshow in San Franciso on August 9. While LSI Logic has developed iSCSI products in the past, it's taken none of them to market.

OnStor plans to release a product containing PyX's iSCSI target implementation by year's end. This is the first iSCSI technology the NAS vendor has licensed.

According to Chris Short, ex-PyX, now VP of sales and business development for SBE storage, the company's goal is to mine new markets, including consumer ones. Devices like wireless handheld communicators and phones will someday have their own iSCSI software, capable of tapping into remote storage as needed. SBE/PyX wants to be in on that.There is competition, and it's a bit farther along. Wasabi Systems Inc., which also makes iSCSI software, claims more than 10 OEMs and boasts an undisclosed investment from Intel Capital (see Intel Takes Stake in Wasabi, Wasabi Supports iSCSI Initiators, Wasabi Intros iSCSI Reference Design, and Intel: Storage Needs a Shrink).

Short says SBE/PyX isn't intimidated by Wasabi and may indeed be casting its net deeper into the storage market. He says his company's products are distinguished by failover, the ability to recover from the point of failure, and the provision of multipathing. PyX can create multiple logical connections on one physical link, he says. That, matched up with SBE's TOE cards, could provide some compelling solutions for storage OEMs.

Mary Jander, Site Editor, Byte and Switch