Planned obsolescence, short upgrade cycles and the data permanence requirements of the enterprise storage business.
From the Inrange prospectus....
Many enterprises have not yet converted their storage networks to Fibre Channel protocol because the large amounts of the information they store on storage systems connected to mainframe computers are not currently compatible with Fibre Channel......
In fact, according to a report issued in November 1999 by International Data Corporation, approximately 70% of the information stored by enterprises resides on mainframe systems.....
As a result of the benefits of the Fibre Channel protocol, we believe that the conversion of these storage networks to Fibre Channel will drive growth of high-end Fibre Channel switches, referred to as directors. As compared to other switches, directors are more scalable and are capable of simultaneously connecting a large number of ports without
interfering with one another. Furthermore, directors are highly reliable, with no single point of failure. We believe that there is a need in the market for Fibre Channel directors that demonstrate the reliability, availability and scalability to manage storage applications that are critical to a business' operations and that have previously been performed within a mainframe environment.
In a report issued in April 2000, International Data Corporation estimated that the Fibre Channel market for storage area network hubs and switches will increase from $236 million in 1999 to $2.8 billion by 2003, a compound annual growth rate of 85%. International Data Corporation also projected that the market for director-class switches will be the fastest growing segment of the Fibre Channel market, increasing from $52 million in 1999 to $1.4 billion by 2003, representing a compound annual growth rate of 129%. Furthermore, information from an International Data Corporation report indicates that director-class switches will maintain a 300% -- 500% price premium over the next lower segment of Fibre Channel switches for the foreseeable future. We believe that this price premium is a result of the enhanced scalability, functionality and reliability of director-class switches.
From 8/3 Emulex earnings release:
....Fibre Channel order momentum accelerated during the quarter, generating a 26% sequential increase in Fibre Channel host bus adapter (HBA) revenues and a 42% sequential increase in total Fibre Channel backlog......
....In June, Emulex announced EMC had selected the LightPulse(TM) LP8000DC dual channel Fibre Channel host adapter to provide Fibre Channel connectivity for its Celerra NAS system. Folino continued: ``Third, Emulex's unique ability among Fibre Channel HBA suppliers to support the FICON protocol is gaining in significance as major storage vendors prepare to launch native FICON storage solutions for the mainframe environment in the second half of the calendar year.''
According to IDC, 25% of all SAN Storage system revenue in 2001 will be comprised of ESCON/FICON interconnected systems. ``Fueled by these multiple sources of demand, fourth quarter unit shipments of Emulex HBAs expanded 44% sequentially from the third fiscal quarter, led by expanding demand for our new-generation LP8000 adapter,'' concluded Folino.
biz.yahoo.com
YTD indicators from EMC, IBM, Hitachi
1) Numbers from Mcdata, Inrange, Brocade and Ancor (not inlcuding QLGC's core HBA biz).
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2) IBM's Enterprise Storage division grew 30% YOY in the second quarter despite persistent delays in Shark with missing teeth.
3) EMC's ESN (hi-end SAN) grew 60% Q2Q and 740% YOY at $400 million in revenues in the second quarter indicating the early wave of corporate SAN deployments that EMC started prepping in 1997-1998. Clariion (mid-range SAN) grew 44% Q2Q and 30% YOY at $141 million despite the fact that EMC is still integrating the DG acquisition which closed late last year. EMC's NAS (hi-end NAS) grew 11% Q2Q and 660% YOY -- more than 10x by 1H2000 over 1H1999 -- at $100 million in revenues indicating that customers do understand the complementary nature of SAN and NAS.
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