Cisco & QLogic: Headed for Huddle

Cisco Systems Inc. (Nasdaq: CSCO) and QLogic Corp. (Nasdaq: QLGC) are likely to become switch partners through an OEM deal whereby QLogic would provide Cisco with 4-Gbit/s Fibre Channel switches, sources say.

The partnership is set, some claim, and financial analyst Tom Curlin of RBC Capital Markets writes in a research note today that a deal is already in place for 20-port switches. According to Curlin, the deal will be announced in the second quarter of the year with switches shipping in the third.

One things for sure: neither company is ready to talk about it. “Cisco does not comment on rumors and speculation,” a Cisco nonspokesman says. QLogic did not return requests for comment.

Not everybody is mum, though. Another well embedded switch industry source confirms an OEM deal between QLogic and Cisco is close if not already sealed. The deal would make sense for both companies. It would help Cisco accelerate its 4-gig switch to market and advance QLogic’s strategy of diversifying into the switch space.

While rivals Brocade Communications Systems Inc. (Nasdaq: BRCD) and McData Corp. (Nasdaq: MCDTA) have publicized their plans, Cisco has been quiet on the 4-gig front. A Cisco spokesman today said that the company expects to offer 4-gig versions of the MDS 9000 family. However, a deal with QLogic would be for a lower-end switch.EMC Corp. (NYSE: EMC) and IBM Corp. (NYSE: IBM) are already selling 4-gig Brocade switches, and McData executives say they expect 4-gig Sphereon switches this year. (See Brocade First With 4-Gig, Last With CUP, EMC Ships 4-Gig Brocade Switch, IBM Offers 4-Gig SAN Switch, and McData's Ready for Rollout.)

“With the 4 Gbps product cycle approaching, Cisco appears to be lagging, while Brocade is well positioned and McData has 4 Gbps product slated for the first half of 2005,” Curlin writes in his note.

Although primarily an HBA vendor, QLogic has made inroads into the low-end and blade server switch markets in the past year (see QLogic Pulls a Switch Deal). Last November, QLogic and McData announced a switch blade partnership that enabled McData to enter that market (see McData Hops on QLogic Blades). Curlin writes that McData might also OEM lower-end switches from QLogic, although that probably won’t happen until after it closes its acquisition of rival Computer Network Technology Corp. (CNT) (Nasdaq: CMNT). (See McData Bags CNT for $235M and CNT Drags Its Feet on Earnings.)

— Dave Raffo, Senior Editor, Byte and Switch