McData's Ready for Rollout

McData Corp. (Nasdaq: MCDTA) is finally ready to quit the talking stage and start the selling stage of its long-awaited new "product-refresh" campaign.

McData is expected to announce at least one OEM qualification early next week for its Intrepid 10000 backbone director (a.k.a. the Intrepid 10K or i10K) and the Eclipse 2640 SAN router it announced last October (see McData Extends Router Family and McData Goes on Offensive).

The Intrepid 10K is the first product to emanate from McData's $102 million purchase of Sanera in October 2003 (see McData Completes Sanera Acquisition). McData envisions it as a backbone director that can be used to connect and manage other directors. Its features include:

McData isn’t saying who will be shipping the new director first, but sources say IBM Corp. (NYSE: IBM) will announce qualification next week, with EMC Corp. (NYSE: EMC) and Hitachi Data Systems (HDS) set to follow soon.

McData is also expected to receive OEM qualification for the Eclipse 2640 16-port multiprotocol SAN router it announced last September. Based in part on technology acquired with McData's $83 million purchase of Nishan Systems last September, the switch is an upgrade over the four-port Eclipse 1620 McData released in October 2003 (see McData Closes Nishan Acquisition). The 2640 supports switches from Brocade, Cisco, and QLogic Corp. (Nasdaq: QLGC).The Eclipse 2640 also has four Gigabit-Ethernet ports that can be used to convert between Fibre Channel and iSCSI or iFCP for distance, and it supports FC-to-FC routing and dynamic window sizing to help mitigate packet loss. Eventually, the router will be offered as a blade for the i10K, says one analyst, who asked not to be named. The SAN router will compete with the Cisco MDS 9216i multiprotocol switch, which was also announced in September (see Cisco Readies Multiprotocol Switch).

McData's 2005 product map also includes 4-gig switches, a virtualization switch built on technology acquired through a $6 million investment in Aarohi Inc., and an intelligent switch to be used with EMC’s storage router (see Aarohi Announces Funding... Again, Aarohi Advances Action Plan, and EMC Takes Storage Router for a Spin).

McData’s future could depend on the success of these and other 2005 new products, especially the Intrepid 10K director. In terms of market share, McData lost ground last year while integrating the technology gained from its acquisitions in 2003 (see McData Sweeps Up Nishan, Sanera).

According to market research firms Dell'Oro Group

and The Yankee Group, McData consistently lost share in the director market to Brocade and Cisco in 2004 (see Dell’Oro Says Director Sales Grew and Yankee: SAN Market Shrinks in Q2). Data from Goldman Sachs & Co. shows McData also dropped in the overall switch market (see SAN Switch Year-End Summary).

At its Analyst Day last September, McData execs blamed lackluster 2004 financials on a product transition period (see SAN Switch Year-End Summary and McData Merely Mediocre). In other words, customers were waiting for new offerings to come out before buying. Management promised to come out fighting with new product releases this year.McData CEO John Kelley can't seem to wait for the rubber to hit the road. He has been talking up the Intrepid 10K for at least five months and says he thinks it will start to generate revenue right away (see McData Stays Out of the Red). “We expect revenues [from the i10K] in the quarter that begins in February,” Kelley said last week at a conference hosted by RBC Capital Markets.

Meanwhile, industry analysts and investors are watching the switch space closely -- with a beady eye trained on McData. A poll of executives and investors at last week's RBC conference named Brocade and McData as the most likely acquisition targets over the next two years. And the most likely to acquire other companies? Cisco and EMC (see RBC Poll Forsees More M&A).

— Dave Raffo, Senior Editor, Byte and Switch