Cisco, McData in Director Draw

Cisco Systems Inc. (Nasdaq: CSCO) moved into a dead heat with McData Corp. (Nasdaq: MCDTA) for director revenue in the fourth quarter of 2004, according to the market research firm The Yankee Group.

The Yanks estimate that Cisco and McData each pulled in $46.9 million in revenue from directors, giving them 32.6 percent market share apiece. McData, which dominated the director market until the past year, slipped from 36.8 percent market share in the third quarter. Cisco was at 28.9 percent share in that quarter.

McData remains No. 2 behind leader Brocade Communications Systems Inc. (Nasdaq: BRCD) in the total Fibre Channel switch market, but Cisco has steadily made great strides in the high-end director space. Yankee Group analyst Stephanie Balaouras says Cisco grew director revenue 90 percent since the research firm began tracking Ciscos storage revenue in the first quarter of 2004.

Cisco had $24.8 million in director revenues in the first quarter of 2004 and increased in double digits sequentially each quarter to catch McData. Balaouras attributes Cisco’s gains to its having technological leads in areas such as virtual SAN (VSAN) partitioning, multiprotocol routers, and iSCSI blades (see Cisco Flaunts Fancy SAN Features and Cisco Readies Multiprotocol Switch). Meanwhile, McData spent much of 2004 waiting to ship new products (see McData Goes on Offensive and McData's Ready for Rollout).

“A lot of Cisco’s gain has been at the expense of McData,” she says. “The good news for McData is that CNT has had a couple of good quarters in a row.” McData in January announced it would acquire Computer Network Technology Corp. (CNT) (Nasdaq: CMNT) for $235 million (see McData Bags CNT for $235M). Since CNT began shipping its UltraNet Multi-service Director (UMD) last July, it made sequential quarterly revenue gains of 24 percent and 17 percent, according to Yankee (see CNT Stakes Claim on New Director). CNT improved its market share to 9.9 percent in the fourth quarter, up from 8.8 percent in the previous quarter.

McData, which hopes to close the CNT sale by June, has yet to announce whether it will continue to sell the UMD (see CNT, McData Mull Product Conundrum). CNT’s director competes with McData’s Intrepid 10,000 (i10K) director that began selling in January.

Brocade dominated the switch (less than 64 ports) market with $81.4 million in revenues and 57.9 percent market share in the fourth quarter. McData followed at $24.6 million, and QLogic Corp. (Nasdaq: QLGC) was third at $14.9 million. Cisco is fourth in switches with $13.1 million in revenues.

Brocade leads the combined director and switch market with $119.9 million in revenues and a 42 percent share for the fourth quarter, followed by McData at $71.5 million and 25 percent and Cisco at $60 million and 21 percent.

Table 1: Director Revenue

Table 2: Switch Revenue

— Dave Raffo, Senior Editor, Byte and Switch