CNT Stakes Claim on New Director

Computer Network Technology Corp. (CNT) (Nasdaq: CMNT) unveiled its new director switch product today, putting rivals on notice that it's not content to take a back seat in this ultracompetitive market.

The UltraNet Multi-service Director (UMD) series represents CNT's integration of the switches it acquired through its $190 million purchase of Inrange Technologies in April 2003 (see CNT Delivers New Director and CNT Walks Off With Inrange).

The first in the series, the Model 16, is set to ship by the end of August, featuring 256 non-blocking ports of Fibre Channel and/or Ficon traffic in a chassis-based system meant to house a range of add-on modules. In 2005, for instance, CNT says it will offer blades for 4- and 10-Gbit/s connectivity, Gigabit Ethernet, SAN extension, and quality-of-service control. Also next year, CNT plans to round out its series with lower-end switches as well as a higher-end 512-port UMD.

CNT doesn't yet have its new UMD platform certified by SAN vendors, though it claims to be working on that. And one source says IBM Corp. (NYSE: IBM) should announce certification within a week.

So where's the beef here? The news isn't really CNT's 256-port switch, which Inrange previously offered. But the vendor says increased demand for scaleability, plus the addition of new features, put the UMD in a nice position relative to contenders Brocade Communications Systems Inc. (Nasdaq: BRCD), Cisco Systems Inc. (Nasdaq: CSCO), and McData Corp. (Nasdaq: MCDTA), which have their own bigger directors due later this year (see VP Details McData Software Makeover and Brocade Dazzler Starts Low).It's the timing that's key. As Greg Schulz, senior analyst at the Evaluator Group, sees it, CNT has "a large installed base, and now is the time when vendors have an opportunity to go in and get customers to adopt their platforms." As SAN segments proliferate, he says, a forklift upgrade is becoming inevitable for most organizations, which must decide to stay with their current vendor or move on. If CNT plays its cards right, it can get some to replace their existing directors with the UMD.

Its service reputation, a large port count, and a new, smaller footprint are all in CNT's favor, Schulz says. "The new family reduces the footprint [of CNT directors] by a factor of four," he maintains. "That was an issue for them."

Another analyst, Stephanie Balaouras of The Yankee Group, says CNT's chassis-and-blade UMD architecture puts it most directly in competition with Cisco -- not a bad approach, given Cisco's influence in this segment (see Another Look at Cisco).

Still, CNT faces big challenges. According to Yankee, CNT owned 11.5 percent of $144 million in worldwide sales in the first quarter of 2004. That puts CNT fourth, after McData at 49.5 percent, Brocade at 19.2 percent, and Cisco at 17.2 percent. It remains to be seen whether CNT can hold -- and grow -- its own as the other vendors release their new and improved director products in the coming months. After all, they too have a shot at displacing the competition, if Schulz and others are reading it right.

CNT is banking on the director market itself growing substantially. In a speech today, CNT's CEO Tom Hudson cited research that has the $500 million storage director market doubling in size over the next four years, thanks to the growing adoption of SANs and the need to manage multiple segments.CNT's installed base will offer an upramp to this expanded market, Hudson says. CNT sells products and/or services to about 3,000 customers with 10,000 data centers in 33 countries, he maintains, and CNT's strength in offering mainframe Ficon connectivity for storage networks, as well as its reputation for service, give it a leg up.

There are question marks, though: CNT must have key features ready in time to compete with those of its rivals -- and those features must be sufficiently different when they do arrive to convince users to switch platforms. CNT's advantage in claiming the world's biggest director could dissolve if it stalls on delivering virtualization, faster speeds, iSCSI, and Gigabit Ethernet capabilities.

It's also not yet clear how the new platform will influence CNT's relationship with Brocade, whose switches it resells. While Hudson today said CNT would turn to Brocade for "embedded" switch capabilities, the fact that CNT has its own full range of UMDs on the drawing board could be a threat to that partnership.

Mary Jander, Site Editor, Byte and Switch