HP Next to Green-Light Cisco?

NEW YORK -- Hewlett-Packard Co. (NYSE: HPQ) is close to completing the qualification of Cisco Systems Inc.'s (Nasdaq: CSCO) MDS 9000 series of Fibre Channel switches, an HP executive said today at the RBC Capital Markets conference here.

Michael Feinberg, CTO of HP's network storage division, said the company currently has the Cisco switches in its labs and will start offering it to customers "in the market timeframe."

That would appear to mean that HP intends to start reselling the MDS 9000 line by the end of March 2003. This week IBM Corp. (NYSE: IBM) was the first company to officially announce a reseller agreement with Cisco for its first Fibre Channel switches. IBM said it expects to finish testing the gear and to start shipping it to customers by the end of the first quarter (see IBM Tells Cisco: 'Let's Go!').

"People will not have to go elsewhere" to buy Cisco's SAN switches, Feinberg said. "It will not be surprising to see us offer that to our customers." [Ed. note: Do you think he wasn't unintentionally obfuscating his syntax?]

Having HP on board as a reseller will put Cisco halfway to its goal of lining up the four major storage vendors, the other three of which are IBM, EMC Corp. (NYSE: EMC), and Hitachi Data Systems (HDS). Cisco executives say they expect to have lined up reseller deals with each of those vendors by the end of the first calendar quarter of 2003.Currently, HP's premier partner for SAN switches is Brocade Communications Systems Inc. (Nasdaq: BRCD); it also resells McData Corp. (Nasdaq: MCDTA) equipment.

Industry analysts say Cisco's foray into Fibre Channel is potentially most damaging to Brocade's market position. "While Cisco has announced intentions to offer both midrange switches and high-end directors, we believe its efforts, at least initially, are more of a threat to Brocade's position at the midrange than to McData's position at the high end," writes Dan Renouard, an analyst with Robert W. Baird & Co. Inc., in a research note to investors this week. "The performance and availability requirements of the high-end directors are such that we expect it to be more difficult for Cisco to develop a viable product that large, conservative end users would buy versus lower-end switches."

But Brocade CFO Tony Canova, who also spoke today at the RBC conference, said its large installed base -- with 2 million Fibre Channel ports sold to date, the company claims -- as well as its relationships with 23 storage and server vendors will allow Brocade to remain on top in the industry.

"I believe that Brocade has what it takes to be a dominant player here," he said.

Furthermore, analysts note that simply because Cisco signs partners to sell its switches, that doesn't mean they'll necessarily get traction. Regarding its deal with IBM, Renouard comments, "This agreement is high-level and in principle only. Cisco's switches must still be qualified by IBM, and the ultimate success of the agreement will be determined by IBM (or other OEM) field sales representatives."HP's Feinberg, in addition to his remarks about the Cisco MDS switches, said that the company is investing in a next-generation NAS system that will allow users to incrementally scale up capacity and performance simply by adding additional units. He said HP will base the NAS system on the Lustre Linux-based clustered file system, developed by Cluster File Systems Inc., a small software development firm. (For more on this topic, see our recent report, Next-Gen File Systems.)

Todd Spangler, US Editor, Byte and Switch