SNW Leftovers: Page 2 of 4

For those same reasons, Granath suspects 8-gig will jump in ahead of 10-gig as the next speed after 4-gig. Others agree. “There’s still a difference of opinion on that topic,” says Emulex Corp. (NYSE: ELX) marketing VP Mike Smith. “We’re seeing a lot of momentum now for 8 to follow. It’s backward compatible. It’s pretty painful to have to rip out your infrastructure. I haven’t talked to anybody who would want to do it.”

Another storage executive of a company ramping 4-gig products thinks price is the key driver of 4-gig and would have to drive 8-gig as well. There will be no price premium for 4-gig gear over 2-gig equipment. “There’s limited demand for 4-gig,” the exec, who asked not to be named, admits. “You wouldn’t get anybody to buy it as a price premium. It would be the same for 8-gig.”

The issue doesn’t have to be settled for awhile. With 4-gig products still probably nine months away from volume shipment, its successor probably won’t appear before 2008 (see Orlando Braces for Industry Storm).

Four’s a subsystem crowd. Coming off a rough financial quarter, subsystem vendors Dot Hill Systems Corp. (Nasdaq: HILL) and Engenio Information Technologies Inc. find competition increasing for OEM business. Until recently, Dot Hill had the low-end OEM market to itself and Engenio had little competition in the midrange. But Adaptec Inc. (Nasdaq: ADPT) won a deal to supply IBM entry-level systems earlier this year, and Xyratex Ltd. (Nasdaq: XRTX) is looking to expand its OEM business after going public in June. Xyratex gets nearly half of its revenue from selling systems to Network Appliance Inc. (Nasdaq: NTAP), but is seeking deals with other Tier 1 and Tier 2 vendors (see Xyratex Has No IPO Regrets).

Where does Xyratex fit in the market? “I’d say we’re in the middle of the midrange now, and our strategy is to push in both directions in a couple of years,” says Xyratex VP of business strategy Said Rahmani Khezri.