Xyratex Offloads Adapters

Storage subsystem supplier Xyratex has found a way to keep its hand in a side business while maintaining its focus on storage, and its solution could indirectly benefit users.

Xyratex has licensed the technology and key customer accounts for its X-card series of network analysis adapters to Napatech, a three-year-old company based in Copenhagen. (See Xyratex Sells Adapter Biz.) Napatech's specialty is programmable Ethernet NICs used in gear such as protocol analyzers. The startup also has something Xyratex has lacked up to now -- 10-Gbit/s support.

For terms neither party will disclose, Xyratex plans to fork over the building, development, and selling of X-cards to Napatech, which in turn will come out with new products unifying the two companies' wares sometime this fall. Napatech even has the right to hire one or two key sales managers from Xyratex. (The managers have been given the option to stay or to go to Napatech.)

"We'll transfer network analysis accounts and their fulfillment to Napatech for the foreseeable future," says Steve Thompson, Xyratex's CTO. At the same time, though, he says Xyratex will hang onto the basic value of the X-card, including its patents. "If we let Napatech concentrate on the analysis engine, we can concentrate on software and storage applications," he says.

This appears to make sense, given the odd position Xyratex finds itself in. Its network analysis market niche accounted for less than 1 percent of overall revenues in 2005 -- which were $679.6 million. (See Xyratex Reports Q4.) Small potatoes, compared with the company's burgeoning storage and network systems and storage infrastructure businesses. (See Xyratex Reports Q1.)At the same time, Xyratex appeared to have a solid toehold in the niche, with OEM customers that included Computer Associates International Inc. (CA) (NYSE: CA), Network General, and Netscout. Its chief competition came from an aggressive Danish startup (Napatech), which claimed its differentiator was 10-Gbit/s support along with more programmability. (Xyratex delivers X-card adapters with readymade applications for such things as content searching.) To keep network analysis business going while not wasting resources on it, Xyratex hatched the present scheme.

Napatech is ecstatic. Overnight, the tiny firm, which has just 15 to 20 OEMs of its own, plans to more than double that through the deal, according to VP of sales and cofounder Thomas J¸rgensen (ex-IP Semiconductors). What's more, the company just added another $5 million in VC money to beef up its 28-employee roster with new U.S. marketing folk for its satellite office in Mountain View, Calif., and extra engineers back in Denmark.

Napatech has a total of $7.6 million funding to date, from a range of European VCs. The firm also hired a new CEO, Henrik Brill Jensen (ex-Intel, Infineon, and Flextronics) last year. For now, all systems are go.

Jørgensen says Xyratex' help will enable Napatech to further penetrate the packet processing market, supplying cards for VPN servers, application accelerators, intrusion detection monitors, and storage networking gear.

Indeed, according to Steve Thompson, there is a call for an IT product called a "network recorder" that tracks the level of communication between sites, or monitors network volume to gauge when storage capacity or bandwidth must be added.The 10-Gbit/s Ethernet capacity is also intriguing, given the momentum that appears to be building in the space. (See Force 10 Fires Up Low Latency Switch and 10-Gig IP SANs Hit Bleeding Edge.)

Despite the enthusiasm, there is the chance that Napatech's new business won't bust out as quickly as hoped, particularly when it comes to 10-Gbit/s Ethernet. At least one customer, Bill Taylor, assistant VP and manager of network services at Kansas City's UMB Bank, remains unfazed. Despite using NetScout monitors in his large network of over 150 sites, Taylor says he just doesn't need 10-Gbit/s products.

"We just don't require 10-Gbit/s to monitor network health and historical data," he says. "And no, we don't have a storage issue."

— Mary Jander, Site Editor, Byte and Switch

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