Sources: McData to Buy Sanera

High-end SAN switch startup Sanera Systems Inc. is in "final negotiations" to be acquired by McData Corp. (Nasdaq: MCDTA), sources close to McData tell Byte and Switch.

Sources say the price is somewhere around $175 million -- "or a little less" -- comprising cash and stock. Sanera, founded in August 2000, has raised $65.3 million to date from investors that include CMEA Ventures, Storm Ventures, Enterprise Partners Venture Capital, Greylock, Acorn Ventures, ETrade, and Goldman Sachs & Co. (see Sanera Turns On the Juice).

A McData spokesman declined to comment, and Sanera representatives did not respond to requests.

McData does have the cash to pull off a deal of this size: As of December 31, 2002, the company reported having $230 million in cash and short-term investments. And in February, the company raised $172.5 million through convertible subordinated notes, which it said it would use for "potential acquisitions," among other things (see McData, Emulex Rake It In and McData Raises $172.5M From Notes).

Would this be a smart deal for McData? Analysts say it would give the Fibre Channel switch vendor a clear leg up over Cisco Systems Inc. (Nasdaq: CSCO), just as Cisco starts to roll into the market (see EMC, Cisco Do the Deed and Cisco Gets Set)."If it is true... it's a good move for McData," says Steve Duplessie, senior analyst at Enterprise Storage Group Inc. "The Sanera box will bring McData ahead of even Cisco from a technology perspective -- and let's face it, McD needs to violently defend its turf or get run over in the Cisco stampede."

A source familiar with both companies points out that Sanera would give McData a third product line at the high end. McData would have its Sphereon line at the low end (8 to 24 ports); Intrepid in the middle (64 to 140 ports); and Sanera at the high end (256 ports and up).

"It gives them a new high-end architecture that scales with full bisectional bandwidth -- 256 today, 512 to 1,024 later -- far beyond Cisco's MDS 9000," says the source.

Sanera claims that its 256-port SAN switch is the most scaleable platform on the market, providing more than twice the aggregate bandwidth of the high-end systems from Brocade Communications Systems Inc. (Nasdaq: BRCD), Cisco, or McData. Like the Cisco MDS 9000 family, the Sanera switch supports multiple protocols, allowing individual ports to be configured for either Fibre Channel or Ethernet, and also provides an "intelligent" module for hosting storage management applications in the fabric.

The startup also touts a feature it calls "Dynamic Partitioning," which separates the control and the management functions of different virtual SAN segments running over the same physical infrastructure. Cisco's Virtual SAN (VSAN) feature is similar, but Sanera claims its Dynamic Partitioning provides fine-grained management features better geared toward multi-director environments (see Cisco's VSANs: Hype or Innovation?).Sanera's switch, the DS10000, isn't shipping yet. It has entered field trials and is slated to start formal beta testing in May. Based in Sunnyvale, Calif., Sanera has 84 employees, 71 of which are engineering and operations.

Todd Spangler, US Editor, Byte and Switch