Cisco Eyes SAN Startups

Cisco Systems Inc. (Nasdaq: CSCO) may buy a SAN startup to augment its Fibre Channel switch business, according to industry sources.

"I've heard they're doing a little holiday shopping," quips one analyst, who asked not to be named. In a note on storage companies to investors today, another analyst, Thomas Curlin of RBC Capital Markets writes: "Cisco, with intentions of their own, has been seen as actively evaluating strategic opportunities in the marketplace to compliment their core switching business."

So what SAN startups interest Cisco? At least two analysts say one candidate is Incipient Inc., which makes virtualization software for intelligent switches. Incipient has a relationship with Brocade Communications Systems Inc. (Nasdaq: BRCD) and is said to be working with Storage Technology Corp. (StorageTek) (NYSE: STK) on a prototype appliance to compete with a storage router from EMC Corp. (NYSE: EMC). (See StorageTek Plans Virtualization Device and Incipient Looks to Deal.)

Incipient's virtualization software could enhance Cisco's MDS 9000 series switches, and the startup's been rumored for months to be looking at possible suitors.

A Cisco spokesperson says the company can't comment on any rumors about possible acquisitions. Robert Infantino, a spokesperson for Incipient, says the company is not in talks with any firm about being acquired.One analyst believes Cisco has also approached Onaro Inc. and ONStor Inc. Onaro makes change management software and did not return a request for comment. ONStor has virtualization software for NAS environments, and a spokesman says the company "has no comment and no news to report."

Whatever Cisco does, sources say the vendor is intent on using software to advance its own hardware sales. That includes SAN switches, but routers are also a factor. In a note to investors last month, analysts Steve Kamman and Jeff Osborne of CIBC World Markets say Cisco could add storage to its ISR router series: "As a hypothetical example of future functionality, Cisco could potentially introduce a storage-specific module to enable long-distance remote data backups."

Cisco has long acknowledged a strategy to buy key technologies. The tack was demonstrated this week in the company's purchase of routing software supplier BCN Systems Inc. for $34 million (see When Will Cisco Go Soft? and Cisco Buys BCN Systems). Given that SANs are strategic to Cisco, it's likely the vendor will at least be window shopping this season.

Mary Jander, Site Editor, Byte and Switch