Cisco Storage Rebounds

5:00 PM -- Tracking Cisco's storage revenue each quarter requires a talent for reading between the lines and disregarding normal spending patterns. (See Cisco Storage Stays Mysterious, Cisco Storage Slips, Cisco Storage Spikes, and Cisco Doubles SAN Sales.)

As usual, Cisco CEO John Chambers gave a wisp of a hint about storage sales during the Tuesday night earnings call, leaving financial analysts to figure out the exact details. (See Cisco Q3 Gives It an Edge .) Chambers said storage revenue increased in the mid-20 percent range from the same quarter last year. That's clearly a big improvement from the previous quarter, when Cisco's storage revenue declined sequentially. (See Cisco Distracted?.)

While it's common for Cisco's storage numbers to fluctuate, the latest jump was especially strange because storage sales usually decline steeply from the fourth quarter of one calendar year to the first quarter of the next. (See After the Flush.) That was generally the case this time around, as none of the primary storage vendors who sell Cisco's Fibre Channel gear hit home runs last quarter. That's in sharp contract to the previous quarter, when the storage vendors reported huge increases while Cisco declined.

Analyst Aaron Rakers of A.G. Edwards puts Cisco's storage revenue for last quarter at $86 million, a 13 percent sequential gain. Over the last three quarters, Rakers' estimates for Cisco storage revenue show it on a roller coaster ride at $107 million, $77 million, and $86 million, respectively.

It's hard to nail the reason for Cisco's upturn. It launched its overdue 528-port 4-Gbit/s MDS 9513 director in April, likely too late to get much of a boost last quarter. (See Cisco Goes 4-Gig & Big.) Any bump it did get from the new director should have been offset by McData finally getting EMC to qualify its i10K director in March -- 14 months after McData launched that product. (See Qualified Response and McData's Qualification Quagmire.)Cisco sells 4-Gibt/s switches that it gets through an OEM deal with QLogic, but QLogic's earnings dont indicate that much revenue from those switches yet.

Brocade and McData report earnings later this month, but it's almost certain Cisco won market share from its rivals. McData already admitted its revenue will be near the low end of its previous guidance, or around $167 million. That's down from $181 million in the previous quarter, despite its i10K qualification. Brocade's guidance calls for revenue of $157 million to $162 million, a stiff drop from $170.1 million the previous quarter.

"Although lumpy, we view Cisco’s implied sequential storage revenue increase as a negative for Brocade and McData," Rakers wrote in a note to clients today. "We remain focused on Cisco’s new high-end 4Gbps MDS 9513 ramp going forward; as well as the company’s ability to gain share in the fabric switching space -- the latter would represent a positive for QLogic."

For now, Cisco has quieted talk that it is losing interest in selling SAN gear. But given its up-and-down track record, it would take at least two good quarters in a row to completely erase that sentiment.

— Dave Raffo, Senior Editor, Byte and SwitchOrganizations mentioned in this article: