Top Ten Turkey Awards

In keeping with Thanksgiving Day in the U.S., the editors of Byte and Switch offer up our annual Turkey Awards -- highlighting the biggest gaffs in storage networking this past year.

Check out the following list while you nibble your pumpkin pie. If you disagree, agree, or have your own list of howlers, tell us about it on the message board below the article.

No. 1: Squeaky Wheel Turkey

When CEO Carly Fiorina of Hewlett-Packard Co. (NYSE: HPQ) lit into her company's Enterprise Servers and Storage (ESS) division on the third-quarter earnings call in August, few were surprised (see HP Storage Slammed). Pundits had grumbled about HP's lack of storage innovation and strategy since the company merged with Compaq in 2003.

Fiorina's fury resulted in three execs fired, more sales bods hired, and product additions made at the high and low ends of the line, albeit through OEM arrangements. HP's high-end SAN system is based on gear from Hitachi Data Systems (HDS); and the iSCSI feature pack for its new NAS reportedly comes from FalconStor Software Inc. (Nasdaq: FALC), though both companies seem intent on hiding the arrangement (see HP Plots Storage Comeback, HP Adds Low-End NAS, and FalconStor's Flyin').Is it working? Could be. The latest earnings report shows ESS sales up (see HP Storage Down, But Improving). But storage is still down 9 percent year-over-year, though Fiorina concedes SAN's long lead times will stretch the wait until things really pick up. In the meantime, ESS is said to be in line for additional cuts.

Turkey Points:

No. 2: IPO Turkey

It seemed 2004 would be an active year on the IPO front for storage companies. LSI Storage -- soon to become known as Engenio Information Technologies Inc. -- filed to go public in February, and British systems vendor Xyratex Ltd. (Nasdaq: XRTX) and blade server startup Egenera Inc. followed in June (see LSI's Storage Sub Plans IPO, LSI Spells Engenio Xyratex Files for IPO, and Egenera Seeks IPO). Waiting on deck: BakBone Software Inc. (Toronto: BKB) and CommVault Systems Inc. (see CommVault 'Well Positioned' for IPO and BakBone Calls a Reverse).

Well, now the year is nearly over and only Xyratex has made it public. Maybe it should have waited: It debuted in June at a low price of $14 per share -- below the $15 to $17 it hoped for (see Xyratex Swims in Public Pool and Xyratex Has No IPO Regrets. The share price bottomed at $6.85 in August and just recently climbed above the $14 IPO mark, giving its investors little reason to be thankful so far.Engenio made it as far as pricing shares in late July, but its underwriters were underwhelmed by the price. Bottom line? Engenio's postponed its IPO indefinitely (see Engenio Gets Cold Feet).

Will 2005 be the year of the storage IPO for hopefuls such as AppIQ Inc., BlueArc Corp., CommVault, and Xiotech Corp.? That turkey's still uncooked. Unless the market changes, it may never get into the oven.

Turkey Points:

No. 3: Different Drummer Turkey

Emulex Corp. (NYSE: ELX) came into 2004 riding high. It beat its own guidance and analysts forecasts for revenue and income for the last three quarters of 2003, and it had a solid HBA marketshare lead. But the year has produced embarrassing declines and a layoff (see Emulex Cuts Guidance, Jobs, Emulex Hits the Deck, Emulex Short on Revenue, and Emulex Drops Revenue Again).What went wrong? In some regards, Emulex was a victim of circumstance. The HBA market came under pricing pressure, and Emulex got hurt when Hewlett-Packard Co. (NYSE: HPQ) -- one of its top OEM customers -- took a dive.

Emulex's solution to this is peculiar. While rivals like QLogic Corp. (Nasdaq: QLGC) enter lucrative new markets, such as blade server switches and iSCSI HBAs, Emulex goes against the grain by maintaining the SMB market can be conquered through low-cost Fibre Channel rather than iSCSI HBAs. It's also pushing the embedded switches it acquired from Vixel, but analysts consider profit margins and growth potential too low to make up for declines in high-end HBA sales (see Emulex Completes Vixel Acquisition). Meanwhile, time ticks on, and Emulex has yet to wake up and smell the roasting bird.

Turkey Points:

No. 4: Revolving Door Turkey

Forget Harvard Biz. If you're looking for a better job in storage, it seems McData Corp. (Nasdaq: MCDTA) is the preferred training ground these days. Check any promising startup, and you're likely to find a defector from McData's executive ranks: There's Alain Andreoli at Xiotech Corp. and Mike Gustafson at BlueArc Corp. (see Gustafson Leads Exec Carousel). Heck, the ex-CEO and founder of McData, Jack McDonnell, has set up management software shop Crosswalk Inc. just, well, across the walk from his alma mater (see McData Vets at Crosswalk). Granted, McData's going to be a business partner.These are just a few high-profile examples. Turn around at McData, and another veep disappears (see McData Vet Joins Aarohi). Indeed, being a McData senior manager seems a prerequisite for moving on to jobs at rivals like Brocade Communications Systems Inc. (Nasdaq: BRCD). (See Brocade Nabs McData VPs.)

Granted, McData's numbers haven't been thrilling lately (see McData Stays Out of the Red and McData Merely Mediocre). Still, this company's conspicuous for its revolving door, even in a volatile job market. Maybe it should start charging for training.

Turkey Points:

No. 5: Fleeing Losses Turkey

When your company loses over $90 million in one quarter, lays off 450, and looks to be bleeding another $50 million by year's end -- it's takeoff time, right? Apparently, that's what at least three top executives at the troubled disk-drive maker thought -- though one seems to have changed his mind.Maxtor's disastrous third-quarter report was exacerbated by the departure of its second CFO in four months. Here's what CEO Paul Tufano had to say: “Clearly, when two CFOs leave you have to stand up and take notice. So I know there’s probably conjecture and innuendo. I will stand behind these financials 100 percent.” To back his point, Tufano shouldered additional duties of interim CFO.

Less than a month later, he too was gone (see Maxtor CEO Bolts). In his place, the board hired back Michael J. Wingert, former VP of Maxtor's server products group, who'd taken a four-month powder to head up a consumer electronics company. But Wingert's just the COO and president, not CEO. That job's gone to a longtime board member and former CEO C.S. Park.

Confused? This much is clear: Maxtor's in a mess, and no one's eager to jump in and take the blame. Then again, can you blame them?

Turkey Points:

No. 6: Accounting TurkeyTwo backup software companies take this particular turkey: Veritas Software Corp. (Nasdaq: VRTS) and BakBone Software Inc. (Toronto: BKB) both had to restate earnings this year after accounting gaffes.

Veritas restated its financial statements for 2001 and 2002 and delayed its 2003 annual report after an internal investigation turned up accounting irregularities (see Veritas Searches for Truth and Veritas Switches Stock Symbol). When Veritas restated its earnings in June, financial changes were minor but some industry insiders wonder if the situation contributed to a sharp midyear decline in sales (see Veritas Files 2003 Forms and Veritas Takes a Dive).

BakBone is still in the process of restating earnings from mistakes made while moving to U.S. GAAP standards from Canadian GAAP (see BakBone Slip Called Temporary and Bakbone Reports Restated). Adding to the embarrassment, KPMG resigned as its independent auditor without explanation in October, leading the company to hire Deloitte & Touche LLP as a replacement. BakBone also changed CEOs from Keith Rickard to James Johnson this month, but the company claims that had nothing to do with the accounting situation (see BakBone Gets New Head).

Turkey Points:

No. 7: 'Can't Do' TurkeyThere's a point in every startup's life when the right -- or wrong -- turn is fateful. That point may have come this fall for virtualization controller and appliance maker Candera Inc.. After launching a new product and getting $12 million in funding early this year (bringing its total raised to $59 million), Candera still has no OEM deals and stubbornly insists on making all its own apps instead of forming strategic alliances. The tack appears to have blown Candera off course: Its founder left and staff has been cut to the bone (see Candera Cuts Again). Unless there's a sugar daddy waiting in the wings, Candera could wind up on the cutting board.

Turkey Points:

No. 8: Toe-Tagged Turkey

We got more proof this year that iSCSI TCP offload engines (TOEs) are useless appendages on today's SANs, when startups Xiran and iReady closed their doors (see

Xiran Gets Crossed Out and Nvidia Buys iReady).

First, chipmaker Nvidia scooped up iReady’s intellectual property and engineers for around $6 million -- after iReady burned through more than $30 million since 2002. Two months later, in June, SimpleTech folded Xiran, which was a division of that company, forecasting no revenue from iSCSI chips for at least 18 months.Blame it on Microsoft Corp. (Nasdaq: MSFT): Though iSCSI storage systems are beginning to gain traction, no market has developed for accelerators -- mainly because users find Microsoft’s free software initiator sufficient to run IP SANs.

Turkey Points:

No. 9: Wrong Market Turkey

Sandial tried a different approach to Fibre Channel switches, but didn’t get far enough with customers or investors to make it to another Thanksgiving Day (see Sandial's Out).

After picking up $65 million in venture funding and around 20 customers over three years, the clock ran out on Sandial (formerly known as Malachite Technologies) in September. Apparently, no one was interested in the vendor's gear, which used time-division multiplexing to regulate bandwidth and quality of service on FC SANs (see Sandial Switch Surfaces and Malachite Unearths $30M). In the end, this marriage of data comm and storage networking was definitely star-crossed. Sandial execs spent the summer scrambling for cash, but failed in efforts to raise $20 million or attract a buyer from among the major switch vendors (see Sandial's on the Clock ).Turkey Points:

No. 10: Two-Masters Turkey

Last September, BlueArc Corp. founder and CTO Geoff Barrall assured us he remained as focused as ever on the NAS startup he'd helped to found (see BlueArc Still Hot for IPO).

Less than a week later, Data Domain Inc. announced Barrall’s appointment to its advisory board -- a job that's more hands-on than it sounds. Barrall spends a couple of days a week at Data Domain’s Palo Alto, Calif., office, and showed up at Storage Networking World last month with a Data Domain badge -- making for a double-take, considering Barrall has been the public face of BlueArc and usually represents it on panels at industry tradeshows. Hey, if he's got the time, why not? Our question is, Why does he have the time?

Turkey Points:

— The Editors, Byte and Switch