McData Snaps up SANavigator

McData Corp. (Nasdaq: MCDT) stole a march on archrival Brocade Communications Systems Inc. (Nasdaq: BRCD) Wednesday, announcing its intention to acquire SANavigator Inc. for $29.75 million in cash. SANavigators software will give McData the ability to manage other vendors' switches besides its own, something Brocade still can’t do, analysts say. (see McData Buys SANavigator).

Following the customary closing conditions, McData expects to take a one-time charge of between $2.5 million and $3 million in September 2001 for costs associated with the purchase. The company says the deal will dilute its earnings by $0.02 a share in the fourth quarter of 2001 and $0.05 to $0.06 a share in full year 2002. It does not expect to show revenue from the acquisition until the first quarter of 2003.

SANavigator was one of the last subsidiaries of Western Digital Corp.,which is restructuring to focus solely on its hard disk drive business. Western Digital recently announced $5.5 million in external funding to support this move, as well as the sale of its Connex subsidiary to Quantum Corp. (NYSE: DSS) (see Quantum Buys NAS Startup).

For McData’s part, it hopes to increase its share of the storage management software market, a sector estimated to reach $13.4 billion by 2004, of which the storage network management piece could exceed $1 billion, according to Gartner/Dataquest

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By integrating SANavigator into its EOS (enterprise operating system) management software and EFCM (enterprise fabric connectivity manager) software products, McData claims it will have the edge over its competition for managing multivendor networks.EOS manages the configuration features inside a single McData switch, while EFCM manages multiple McData switches within a SAN, the company says. “Layering SANavigator on top means we can manage all the pieces [from other vendors] that go together in a SAN from the switches to HBAs and hubs,” says Brandon Hoff, vice president of strategic marketing at McData.

Analysts say this gives McData an advantage over Brocade as it's Fabric OS management software is designed to manage Brocade switches only. "Fabric OS does not provide topology and device discovery of other elements on the network," says Arun Taneja, senior analyst with the Enterprise Storage Group Inc..

Brocade had not returned calls by press time.

To complete the spin on the deal, McData has coined the phrase “fabric virtualization,” or managing data across multiprotocol, multivendor switches, in much the same way as storage virtualization is supposed to operate across disparate storage devices (see Virtual Reality?).

As far as the competitive landscape goes for storage network management software, the deal leaves Prisa Networks Inc. and InterSAN Inc. as the two remaining startups in this space. They face steep competition from the likes of Veritas Software Corp. (Nasdaq: VRTS), Computer Associates International (NYSE: CA), BMC Software Inc., and IBM Corp.’s (NYSE: IBM) Tivoli unit, each of which are stepping up efforts in this area (see InterSAN Attracts Major InterEST).Robert Wright, the current president and COO of SANavigator, will be VP and general manager of SANavigator when the deal closes at the end of September. SANavigator will become a wholly owned subsidiary of McData, and its 40 or so employees will remain in San Jose, Calif.

McData's stock closed today at $12.70, down 10.56% against the previous day of trading.

— Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com