Will EMC Bag Cisco's Cat?

EMC Corp. (NYSE: EMC) may enter into an agreement with Cisco Systems Inc. (Nasdaq: CSCO) that would allow the storage vendor to resell co-branded versions of Cisco's Catalyst Ethernet switches for iSCSI-based SANs, a source tells Byte and Switch.

According to a source close to EMC, who did not want to be identified, Cisco approached the Hopkinton, Mass., storage player and offered it the option to sell co-branded Ethernet gear -- if EMC agreed to push sales of Cisco's MDS 9000 family of Fibre Channel switches, a market that Cisco is attempting to penetrate very aggressively. EMC is the industry's top supplier of SAN-attached storage and storage networking gear, according to research firm IDC.

"Cisco said, 'If you guys give us 30 percent of the Fibre Channel business, we'll let you co-label the Catalyst 6000,' " our source says. The proposed deal for EMC to resell the Ethernet switches could be announced next month, the source adds.

Though such a co-branding deal would be highly unusual for Cisco, the two companies have already inked such an agreement for the MDS switches. EMC is selling those as co-branded EMC/Cisco equipment, in an arrangement similar to the one EMC has with Dell Computer Corp. (Nasdaq: DELL) (see EMC, Cisco Do the Deed).

"Cisco's doing a lot of unusual things now to gain market share in the SAN space," says the source (see Cisco Misses SAN Sales Target and Cisco SAN Sales: Ramping Hard?).Representatives for Cisco and EMC declined to comment for this story.

Michael Fisch, director of storage and networking at consulting firm The Clipper Group Inc., says such a deal wouldn't be surprising on EMC's part, given that it recently announced native iSCSI connectivity for its high-end Symmetrix DMX arrays (see EMC Debuts DMX, Part Deux and Is EMC Overshooting on iSCSI?).

"They certainly would like to attach more servers to their storage, and iSCSI is a means to that end," he says.

However, other industry observers believe it's unlikely such a deal would ever come to fruition. For Cisco, the argument goes, the arrangement would "devalue" its powerful brand with the Catalyst (also referred to affectionately as the "Cat"). According to Yankee Group, Cisco owned 71 percent share of the Ethernet switch market in 2002.

"I cannot imagine that Cisco would let anyone near its branding on the Ethernet side of the house," says a former member of Cisco's storage networking group. "It was a tremendous uphill battle to get Compaq/HP to be able to private-label the 54xx product." That's a reference to the deal Cisco signed with Hewlett-Packard Co. (NYSE: HPQ), which is reselling a version of Cisco's SN 5400 iSCSI-to-FC router as the StorageWorks SR2122 (see HP Kisses NAS, Nods to iSCSI, HP Takes iSCSI Baby Step, and HP to OEM Cisco's iSCSI Router).Meanwhile, according to other skeptics of the Cat co-branding rumor, such a move by EMC would give far too much leverage to Cisco -- which EMC had circled warily for months before deciding to resell Cisco's Fibre Channel switches earlier this year (see EMC Holds Off on Cisco). And earmarking 30 percent of FC switch sales for Cisco would obviously strain EMC's relationships with Fibre Channel switch makers Brocade Communications Systems Inc. (Nasdaq: BRCD) and McData Corp. (Nasdaq: MCDTA).

Any decision to co-brand the Catalyst "would require sign-off at the highest level," says a Cisco employee. But the person who would be in a position to approve it is Luca Cafiero, senior VP of Cisco's Switching, Voice, and Storage group -- the executive who negotiated the co-branding agreement with EMC for the MDS line. Cafiero founded Crescendo Networks, an Ethernet switch startup Cisco acquired in 1993 whose products became the Catalyst switching unit, now a multibillion-dollar business.

Another detail worthy of note is that Soni Jiandani, VP of marketing for Cisco's storage technology group, was featured prominently in EMC's release announcing iSCSI support for the DMX. Jiandani was quoted as saying, in part: "Cisco and EMC are working together to create blueprints for iSCSI connectivity to the DMX, with the goal of ensuring the same levels of reliability, performance, and low latency offered in Fibre Channel-based networks."

Furthermore, Cisco execs would have a keen interest in providing a fat, juicy carrot to EMC to sell its Fibre Channel switches. That's because the eventual purchase price Cisco pays to acquire Andiamo Systems Inc. -- the Cisco-funded SAN "startup" that developed the MDS switches -- is tied to the sales of the Andiamo products during an unspecified three-month period sometime between now and July 2004 (see Cisco Alters Andiamo Accounting and Cisco's Creative Andiamo Options).

And while some may believe Cisco wouldn't want its Ethernet switches to share the limelight with a third-party vendor, a co-branded EMC/Cisco Catalyst switch -- marketed and sold specifically for iSCSI SAN connectivity -- would "take the Catalyst into a space it's never been in before," says the source.Will EMC sink its claws into the Cat? If this deal goes through, then EMC and Cisco are becoming closer bedfellows than perhaps either one of them would have expected.

Todd Spangler, US Editor, Byte and Switch