MaXXan Seeks CEO - and Sales

MaXXan Systems Inc. is searching for a CEO as the market for intelligent switches is finally forming.

The next few months will be pivotal for MaXXan, which has already outlived several intelligent-switch startups and now faces the established players. Founder and interim CEO Ray Kao is looking for a permanent replacement for Vic Mahadevan, who left in January after a bit more than three years in the chief's chair (see MaXXan Snags $20M, Hires CEO).

Brocade Communications Systems Inc. (Nasdaq: BRCD) and Cisco Systems Inc. (Nasdaq: CSCO) are preparing to bring out intelligent switches in support of the Invista virtualization product from EMC Corp. (NYSE: EMC). Thanks to Invista, industry insiders suspect the window of opportunity is rapidly closing for startup intelligent-switch vendors (see EMC Unveils Invista).

Kao, though, says the window is just opening, thanks to the attention the segment received from EMCs entry. Even if Kao’s correct, MaXXan needs to take advantage quickly.

The official word from MaXXan is that Mahadevan left to pursue other interests, but sources say the board wanted a change, in the wake of disappointing sales. Kao, who founded the company in 2000, says the next CEO will be expected to significantly bump up revenues.“Basically we’re looking for somebody who can grow revenue into several hundred million dollars and take the company public,” Kao says. “That definitely won’t happen this year, but in the next year or two.”

That’s a lofty goal, considering the smart-switch space is a slippery slope, especially for startups. MaXXan competitors Candera and Sandial went under in 2004, and Maranti Networks Inc. has been trying to scrounge up funding and also lost its CEO when Debbie Miller left in January (see Candera's Closed, Sandial's Out, and Maranti's Minus a CEO).

MaXXan appears well funded after pulling in $29 million in December, but its challenge is distribution (see MaXXan Scores $29M).

SAN switches are sold primarily through OEM deals with the major storage system vendors -- EMC, Hewlett-Packard Co. (NYSE: HPQ), Hitachi Data Systems (HDS), and IBM Corp. (NYSE: IBM). Brocade, Cisco, and McData Corp. (Nasdaq: MCDTA) have those deals locked up, and are ready to move into intelligent switches.

Analyst Steve Berg of Punk Ziegel & Co. says today's switch market leaves little room for Maxxan. “It’s an OEM-dominated business, and they’ve got none of the OEMs,” he says.Kao agrees that MaXXan needs an a OEM deal to push its switches, but disagrees that it is shut out. He thinks the development of the smart-switch market will help it land a deal.

Competition will be fierce: Brocade and Cisco will be ready with integration when Invista ships in July, and McData expects its intelligent switch to begin shipping early next year (see EMC, Brocade Team on Invista and Cisco Seeks Intelligence). The three will pursue other OEM deals.

“In order to grow to several hundred million, we need channel partners,” Kao says. “This is a paradigm shift, a new playing field. McData or Brocade or Cisco -- they don’t have a mature product yet. We see this as an open window of opportunity. We have been selling intelligent switches and appliances for a few years."

MaXXan recently announced its first midrange intelligent switch after starting with a director switch (see MaXXan Midrange Switch Confirmed and MaXXan Intros Intelligent SAN Switch ). That at least should keep it from directly competing with Invista, which EMC envisions as a high-end product at the start. Still, it remains to be seen if midrange companies will embrace MaXXan intelligent switches, despite the company's limited sales on the high end.

Kao says MaXXan has around 100 customers, a small fraction of what it needs to reach hundreds of millions in revenue. But then again, the storage networking market is full of surprises.— Dave Raffo, Senior Editor, Byte and Switch