NetApp Banks on iSCSI
Recent figures show the vendor's faith in emerging IP SAN market appears justified
December 4, 2004
Two days after Network Appliance Inc. (Nasdaq: NTAP) CEO Dan Warmenhoven proclaimed iSCSI the market of today,” IDC gave evidence the market is indeed accelerating to NetApp's advantage (see IDC Releases Disk Figures).
IDC’s latest disk storage numbers show iSCSI third-quarter 2004 revenue increased nearly 44 percent from the previous quarter, even as overall networked storage revenue dipped a bit. NetApp had 43.1 percent of the iSCSI market in the quarter, followed by EMC Corp. (NYSE: EMC), which had 22.1 percent.
The news is interesting on two counts. First, it indicates that the hoped-for growth in the much-hyped iSCSI market is actually occurring — even though it's clear iSCSI remains a sliver (1.7 percent) of the overall networked storage market, according to IDC. Second, it provides context for the rosy forecasts Warmenhoven paints for NetApp: On NetApp's Analyst Day Wednesday, execs projected an overall revenue increase ranging from 32 percent to 35 percent for fiscal 2006 — which begins May 1, 2005, for NetApp.
IDC says NetApp led all storage disk vendors with 24.6 percent year-over-year growth for the third quarter.
Though NAS remains NetApp’s bread and butter, Warmenhoven says iSCSI’s low cost and ease of use will allow it to grow more quickly than people think.“The wild card bet, the one we believe is going to outgrow all the analysts’ forecasts, is iSCSI,” Warmenhoven told analysts. “Many of you have been thinking it’s the market of tomorrow — but I believe it’s the market of today.”
NetApp is far from alone in recognizing the potential of the iSCSI market. Although not as effusive about iSCSI as Warmenhoven, EMC CEO Joe Tucci has said he expects that market to emerge late next year (see Tucci Touts ILM). That’s a likely indication that EMC will bolster its iSCSI product line.
Another indicator of iSCSI market growth is that both NetApp and EMC lost iSCSI market share from the previous quarter, as their combined share slipped from 72.7 percent to 65.1 percent. While IDC doesn't break out other vendor shares (since nearly all are privately held), the research suggests iSCSI startups such as EqualLogic Inc., Intransa Inc., LeftHand Networks Inc., and Sanrad Inc. have started to gain traction. It's also possible iSCSI offerings from Adaptec Inc. (Nasdaq: ADPT) and IBM Corp. (NYSE: IBM) are gaining ground (see Startups Look to iSCSI Surge).
iSCSI isn't guaranteed to take over the market. Low-end Fibre Channel SAN systems introduced by EMC, Dell Inc. (Nasdaq: DELL), Hewlett-Packard Co. (NYSE: HPQ), IBM, and Sun Microsystems Inc. (Nasdaq: SUNW) this year could blunt the advance of iSCSI.
“iSCSI SANs definitely contributed to growth in entry and midrange storage, but iSCSI is still a small portion of the revenues,” says Natalya Yezhkova, IDC senior research analyst of storage systems.“Another part of the trend is growing sales of midrange Fibre Channel SAN. All of the top vendors this year introduced new disk storage systems products that target the entry-level and midrange segments.”Overall, the combined SAN and NAS markets totaled $2.087 billion, down a tad from $2.098 billion the previous quarter, but up 17.1 percent from the same time last year (see Storage Nets Surging, Says IDC).
The top seven networked storage vendors — EMC, HP, IBM, NetApp, Hitachi Data Systems (HDS), Dell, and Sun — all increased revenue in the general market from last year. EMC remained the overall networked storage market share leader with 28.9 percent share and was a shade from the top spot in both SAN and NAS.
HP led the SAN market with 27.6 percent, down from 30.2 percent a year ago, with EMC at 27.4 percent. NetApp remains the leader in NAS market with 36.3 percent share to EMC’s 34.8 percent.
— Dave Raffo, Senior Editor, Byte and Switch
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