Cisco, McData in Retail Faceoff

File this under unconfirmed, but fascinating, rumors: Cisco Systems Inc. (Nasdaq: CSCO) and McData Corp. (Nasdaq: MCDTA) are said to be caught in an unresolved competition for SAN business at Wal-Mart Stores Inc.

Apparently, McData has been supplying Wal-Mart with SAN switches for a while and won a bid for additional gear several months back, but Cisco CEO John Chambers got the store's technology buyers to consider its MDS 9000 as well, leading to a cycle of testing and bidding that still hasn't ended.

The story is interesting on several counts. First, Wal-Mart, which declined to comment for this article, has been notoriously cagey about its SAN setup, even though industry sources say it has one of the world's biggest commercial SAN deployments, allegedly including gear from McData, EMC Corp. (NYSE: EMC), and IBM Corp. (NYSE: IBM). So anything about it draws industry interest.

The story also illlustrates what sources say is Cisco's upselling approach. Cisco isn't shy about pushing longtime big customers of its networking equipment to consider its relatively new SAN switches -- even if they've already got someone else's.

Cisco, a longtime supplier to Wal-Mart, reportedly wouldn't settle for "no" when sales folk learned that McData had passed the initial bid for additional SAN equipment several months back. "John Chambers called the Wal-Mart CEO and extended the sales cycle another two months," says one financial analyst, who asked not to be named. "He begged for another shot."Apparently, it worked. At the moment, the decision seems up in the air. "Cisco has not declared defeat yet, and McData has not declared victory yet," says another industry consultant, who spoke on the condition of anonymity. McData has apparently won with technologists at Wal-Mart twice, only to see the bidding reopened by higher-ups.

Another source, a third industry analyst who -- you guessed it -- didn't want his name disclosed, says he's not a bit surprised to hear about the Cisco/McData duel. As a marquee account, Wal-Mart is aware of its influence on the IT market, he says, and the retailer doesn't hesitate to temporarily swap suppliers, or pit them against one another, to get a better deal: "They're experts at it."

Ultimately, Source C sees Wal-Mart making some sort of arrangement to use both Cisco and McData. "They probably won't risk Cisco yet for high-end [SAN switches]... I would expect to see asplit order, with Cisco being thrown a bone probably for the open systems side of Wal-Mart, and McData being given some Mainframe/Ficon and intermix with open systems business... and they'll make both vendors cough up."

Neither Cisco nor McData would comment for this article.

Mary "QT" Jander, Site Editor, Byte and Switch0