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SAN Valley Does the Cisco Two-Step: Page 2 of 3

The company's eight-port SL1000 device, which connects Fibre Channel using Internet Protocol (FCIP) encapsulation, helps tie together remote storage networks over an IP backbone. Service providers, including Enron Corp. (NYSE: ENE), are trialing the device, with a mind to offering storage as a high-bandwidth service.

SAN Valley's close ties with Cisco began when Andreas Bechtolsheim, one of the founders of Sun Microsystems Inc. (Nasdaq: SUNW) and now VP of engineering for Cisco's enterprise group, encouraged Cisco to invest. Bechtolsheim also put some of his own money into SAN Valley.

After two rounds of funding the company has a total of $31 million from Moore Capital, Upstart Capital, Vertex Management, Innovacom Venture Capital, Cisco, and Agilent Technologies Inc. (NYSE: A). It is in the process of looking for a third round but is "in no rush," according to Walsworth.

In getting its technology accepted in the market, SAN Valley has plenty of competition to battle: SANcastle Technologies, Lucent Technologies Inc. (NYSE: LU), CNT Networks, Entrada Networks (Nasdaq: ESAN), Crossroads Systems Inc. (Nasdaq: CRDS), and Cisco (through its NuSpeed acquisition) are all competing in the IP storage connectivity market.

William Hurley, storage analyst with The Yankee Group is bullish on SAN Valley's chances, although he says demand is not yet there for IP-based devices. "These products will increase the adoption of SANs, but the robustness must be proven," he says. "Point-to-point wavelength services are still the most reliable way to connect remote storage networks together today. SAN Valley has its work cut out."