Competition in the low-to-mid end of the Fibre Channel switch market may soon get even tougher.
plans to introduce a new low-to-midrange switch this spring, according to a research note by Susquehanna Financial Group
analysts Kaushik Roy and Phillip Rowe.
Codenamed “Dazzler” and based on a derivative ASIC
“We believe Dazzler could be out in the April-May timeframe, and could replace the Silkworm 3800 and 3900 switches gradually thereafter,” the
Brocade hasn’t developed a new product in the last 18 months, and despite having the largest footprint in the midrange of the market, has lost market share over the last three quarters to McDATA’s
“flexport” architecture and low-cost Sphereon 4500 switch, according to the analysts.
“With Dazzler, Brocade should be more profitable with existing customers, and can be more aggressive with pricing, if necessary, to maintain market
share while holding margins,” Roy and Rowe wrote.
The analysts also report QLogic’s new SANBox 5200 switch, expected to debut soon at about a 40% discount to Brocade’s current prices (about $900 per port), will “mostly target green field opportunities.”
Interest in Cisco has been related to the virtual SAN (VSAN) feature to logically separate SANs, which is more useful for Cisco’s high port count switches, the MDS 9500 Directors. “We have not found evidence of much sales activity for Cisco’s lower port count 9100 and 9200 switches, which are priced above comparable Brocade and McDATA switches,” Roy and Rowe said.
“McDATA still presents the most compelling competition to Brocade, but Dazzler should give Brocade more leeway in pricing,” the research note added.
Roy told Enterprise Storage Forum that how Brocade prices the new switch – and how McDATA and Cisco respond – “is anybody’s guess. But our take is that prices in general are coming down, and we expect more competition in pricing. As of now, the Cisco prices are highest, followed by Brocade and then McDATA for the midrange products.”
“The margins on the Dazzler product will be significantly better than their current product,” Roy said. “Hence, they will be able to lower prices without hurting their gross margins.”
Roy and Rowe also upped earnings estimates on Brocade and said they are seeing strong demand for Brocade’s January quarter.
Additionally, they don’t expect “material revenues” from Brocade’s Rhapsody fabric application platform in 2004. “The end-user demand for a platform that offers higher level storage functionality … in the network is limited in the near term,” they wrote.
Roy and Rowe added that any potential partnership with Dell “could have limited revenue impact unless Brocade becomes the lowest-cost provider of Fibre Channel switches. Dell currently sells Brocade’s Fibre Channel switches, but Dell has a history of seeking the lowest-cost provider. Thus, we do not expect Dell to sign an exclusive deal with Brocade.”
A Brocade spokesperson declined to comment on the Susquehanna report, but confirmed that CEO Greg Reyes stated during a financial analyst call and at Lehman Brothers recently that the company has cost-reduced solutions in the works.
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