CNT's Undercover Deal With Sanera

In December 2002, CNT (Nasdaq: CMNT) signed an OEM agreement with high-end SAN switch startup Sanera Systems Inc., according to documents McData Corp. (Nasdaq: MCDTA) filed with the SEC on Monday.

At this point, however, industry observers expect the CNT/Sanera deal to be eventually terminated or allowed to expire, now that McData has acquired Sanera and CNT has bought Inrange Technologies (see CNT Digests Inrange and McData Sweeps Up Nishan, Sanera).

McData this week acquired Sanera along with IP storage switch maker Nishan Systems Inc. McData paid $102 million in cash for Sanera (not including the approximately $10 million cash on hand Sanera has). Sanera had received around $76 million from its VCs, with a commitment for an additional $25 million (see Can $35M Save Sanera?).

A description of McData's agreement to acquire Sanera in McData's 8-K report -- filed with the SEC on Aug. 25 -- refers to "deferred revenue related to the payments made pursuant to the OEM Agreement between the Company [Sanera] and Computer Network Technology Corporation [CNT] dated as of December 3, 2002."

CNT spokeswoman Jennifer Weidauer confirmed that the two companies had an agreement, which she says is still in effect. But she says according the agreement, CNT cannot disclose the terms without Sanera's permission.Patrick Harr, Sanera's VP of marketing and business development, says pretty much the same thing: "The agreement with CNT is in place and is in effect today. The agreement covers Sanera's products."

Byte and Switch reported last year that Sanera laid off around 20 percent of its workforce as it prepared to ship a product to CNT, which was its first signed OEM (see Sanera Tightens Its Belt).

Originally, CNT was expecting to start selling and servicing Sanera's DS10000 director switch this fall, based on that deal, according to an independent industry consultant who wishes to remain anonymous. "That OEM deal had been morphing into an acquisition by CNT until they decided to buy Inrange instead," says the consultant.

So why did CNT ultimately choose to buy Inrange rather than Sanera? The most likely explanation is that Inrange had a shipping product with the FC/9000 director that was generating a sizeable revenue stream, unlike Sanera, which was still months away from getting its switch out of beta.

In any case, Sanera had at least two serious suitors in CNT and McData -- an enviable position for any startup.Todd Spangler, US Editor, Byte and Switch