Snap Plans Poor Man's SAN

Snap Appliance Inc., the company formed last fall by the combination Quantum Corp.'s (NYSE: DSS) NAS division and startup Broadband Storage Inc., plans to expand beyond its NAS purview later this year with a SAN storage offering aimed at small and midsize businesses.

Eric Kelly, Snap's CEO and president, says the company will continue to be focused primarily on NAS. But he says the "SANs-for-the-masses" segment has been virtually untapped to date, ignored even by the likes of Dell Computer Corp. (Nasdaq: DELL) and Hewlett-Packard Co. (NYSE: HPQ).

"That's an open playing field right now," he says. "Customers are looking for enterprise features -- and not everyone can spend $30 million on a SAN... The NAS market is critical to us, but we want to expand beyond that."

Snap's SAN storage system, slated to ship in the second half of 2003, will be based on technology developed by Broadband Storage, which was developing a unified block and file storage system. The startup has worked closely with QLogic Corp. (Nasdaq: QLGC), for its Fibre Channel switch.

In the meantime, Snap is going to punch up its NAS offerings. Next week, it plans to start shipping a 720-Gbyte version of its Guardian 4400 midrange NAS system. It will also announce enhancements to its Linux-based Guardian operating system. Guardian OS version 2.2 will provide better Network File System (NFS) performance, enhance snapshot data-replication features, and integrate Computer Associates International Inc. (CA)'s (NYSE: CA) antivirus software, the company says."We really want to expand our relationship with key resellers, and to move upmarket into the entry-level enterprise space," Kelly says.

Kelly, who previously headed up the now-defunct NAS division of Maxtor Corp. (NYSE: MXO), has been in charge at Snap since its formation in mid-October 2002 (see Quantum Evicts NAS Unit and Maxtor Pulls Plug on NAS).

Actually, the genesis of Snap Appliance began a year ago. According to Kelly, he was talking to Mark Pollard, then the marketing VP at Broadband Storage, at the RBC Capital Markets conference in New York last year. "We started saying, 'The next player that's going to make a breakout in the storage arena is one that has a great brand, great technology, and great channel,' " Kelly says.

Kelly says at one point he and the Broadband Storage group considered spinning off the Maxtor NAS division to form Snap Appliance, but that ultimately Quantum's NAS group won out. "Snap had a larger installed base, deeper intellectual property, and if that didn't push you across the line there was the partnership with Quantum," he says. "It just made sense."

So far, so good: Kelly says privately held Snap's Q4 2002 revenues exceeded expectations it had given its investors by 17 percent. (However, he declines to provide sales figures.) Snap's investors include Quantum, along with Mellon Ventures Inc. and Moore Capital Management Inc., who were originally investors in Broadband Storage (see Broadband Storage Shrinks and Broadband Waltzes In).The San Jose, Calif.-based company now employs about 100 people. It retained about 40 of the 100 employees in Quantum's NAS division -- basically, it was the core engineering team, Kelly says. Snap also brought in around 30 employees from Broadband Storage, and the remainder came from Maxtor. "The good news about what happened is that we were able to hand-pick folks we wanted," Kelly says.

Snap's management team includes Vic Jipson, VP of engineering, who was previously general manager of Maxtor's desktop drive group and IBM Corp.'s (NYSE: IBM) optical subsystems drive business. Also from Maxtor, Kelly brought over Jillian Mansolf, VP of sales and channel marketing, and Randy Gast, VP of operations. Snap CTO Greg Bolstad and Pollard, who is VP of marketing and business development, join the company by way of Broadband Storage.

The company flies under the radar of the two giants in the NAS space -- Network Appliance Inc. (Nasdaq: NTAP) and EMC Corp. (NYSE: EMC) -- which sell higher-scale and more expensive NAS systems.

However, Snap is going to stare down a huge and formidable foe in Microsoft Corp. (Nasdaq: MSFT), which sells its Windows Server Appliance Kit (SAK) NAS software to Dell, IBM, and others. But Kelly doesn't rule out using Microsoft's SAK in future versions of Snap products. "There's a set of customers that don't want to use Microsoft, and there's a set of customers who use only Microsoft," he says. "Right now, we're focused on Linux and BSD [Berkeley Software Distribution, a Unix variant that forms the basis of SnapOS], and we're doing extremely well with that... but 24 months from now, we may have to look at offering a new product."

Is there an IPO in Snap's future? Not anytime soon, says Kelly. "I just want to make sure we build a long-sustaining company." That said, 10 years from now, he says, "I think I'll be talking to you as the Goliath in the industry."Big words from a company that's not much more than a David today.

Todd Spangler, US Editor, Byte and Switch
http://www.byteandswitch.com