Tempest in the Tea Leaves

12:45 PM -- Market research can be a helpful tool, but as any marketeer worth their MBA can tell you, the figures you get from your subscription are a baseline, not a bible.

So I was puzzled when Brocade wrote this week asking to indoctrinate me about the latest quarterly Fibre Channel switch numbers from the Dell'Oro Group. (See Dell'Oro Reports Strong Sales.) Apparently, something in there had them agitated. But since Tam's minions refused me access to the data (on grounds that a subsidiary of Byte and Switch's parent company sells reports on various markets), my hands were tied.

Still, Brocade's reaction got me thinking. Dell'Oro's revelation that the Fibre Channel switch market grew 15 percent during the fourth quarter of 2006 is underwhelming. It's more telling that Brocade feels Cisco might threaten its position atop the Fibre Channel food chain.

Why is this so? Brocade, after all, reported $224 million in revenue for its first quarter 2007, showing 15 percent growth year-on-year and 23 percent growth sequentially in directors alone -- without McData's wares added in. (See Brocade Boasts Big Quarter.) Analyst consensus is that Brocade's doing fine, even though the process of digesting McData continues apace.

At the same time, Cisco is apparently gaining sufficiently in enterprise revenue to rankle Brocade to the point of calling the media dogs. (See Cisco: Storage Stars in Earnings.)And if Cisco, the world's leading enterprise router vendor, which also leads in Ethernet switches, is now a major threat to Brocade's market leadership, that tells us there's might behind the Fibre Channel market. Not only is it growing by double digits, it's not going to cave in under pressure from 10-Gbit/s Ethernet, not even 10-Gbit/s Ethernet over copper.

Of course, there are caveats. It's tough at this point to get the actual figures from Brocade and Cisco on which to stake market share claims. Pricing is also factor. According to analyst Shebly Seyrafi of Caris & Co., Brocade's port shipments grew 47 pecent year-on-year for fiscal 2006 (sans McData's input). But pricing per port fell 12 percent year-on-year. "This resulted in 31% Y/Y growth in revenue," Seyrafi wrote in a note on March 13.

So the battle of the tea leaves rages on.

You can tell a lot about a person from the fights they pick. And by picking this one, Brocade revealed that not only is Fibre Channel switching alive and growing, it's got sufficient forward momentum to make competition a sizeable factor, and one that's coming from a key supporter of enterprise Ethernet.

Storage research is more fun than American Idol!Mary "Don't 'Paula' Me" Jander, Site Editor, Byte and Switch