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McData: buying its way into SAN niches

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McData is at last set to spend the $150 million cash pile it raised in February, with knockdown purchases of both Nishan Systems and Sanera Systems. The acquisitions will help McData build up its business in potentially important areas of SAN technology that have already attracted the interest of rivals Cisco and Brocade.

The technologies McData is buying into are smart-switching and multi-protocol support - technologies in which Cisco Systems and Brocade Communications Systems both gained their leads last year by making the same sort of start-up acquisitions as McData has just announced.

Nishan and Sanera will be acquired for around $85 million and $102 million cash respectively - relatively low prices that reflect the dim prospects the two firms had as start-ups, dimmed by the investments already made in the same areas by Cisco and Brocade. Nishan has been selling only around $3 million to $5 million of its IP storage routers or protocol converters each quarter, McData said.

Earlier this summer Cisco began shipping optional cards for its SAN switches and directors that perform the same function as the Nishan devices, and Brocade's forthcoming Fabric Application Platform will offer the same multi-protocol support when it ships around year-end.

Sanera has begun sampling a giant director that sports 256 ports. However, similar large directors are already shipping from Cisco, and were already in development at McData, and the start-up is one of several smart-switch start-ups. Sanera has previously boasted that its director will sport as many as 1,500 ports, and software-based partitioning of SANs. The latter will be similar to technology already on offer from Cisco, and which McData has previously said that it is developing.

Despite hyping its acquisitions as "redefining storage networking", McData's purchases will simply bolster the company's position in a challenging market. The deals will help it catch up with its rivals Cisco and Brocade in future and developing areas of SAN technology that are not yet important to current sales, but which are very likely to become so.

Source: Computerwire/Datamonitor

Recommended research: Reuters Business Insight, "The Wireless Outlook"

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