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Who's Saying What About Fibre Channel?
Salomon Smith Barney
Monday, May 15, 2000
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--SUMMARY:----Computer Storage *We felt it might be helpful to provide an update on some of the emerging storage networking initiatives. *The more we dig into the various initiatives, the more we believe that FC will continue to be the only reliable, enterprise class storage networking technology for at least another 2-3 years. *Brocade continues to be the clear storage networking industry leader. We expect Brocade to 1) continue to beat consensus estimates, 2) continue to roll out new and innovative products and technologies, and 3) continue to announce broader technology partnerships. *In this report we discuss proposals from Cisco/IBM, Lucent/Gadzoox and Adaptec. We also review Alacritech's non-storage solution. --OPINION:------------------------------------------------------------------ Overview -------- Following our recent "Fibre Channel vs. Ethernet" report, we felt it might be helpful to provide an update on some of the emerging storage networking initiatives following our visit to N+I last week. In the end, the more we dig into the various initiatives, the more we believe that Fibre Channel (FC) will continue to be the only reliable, enterprise class storage networking technology for at least another 2-3 years. The important thing we have also noticed is that many of the various Ethernet "storage" solutions would require costly and complex hardware and software upgrades in an effort to get to a less expensive, homogeneous network with "existing" equipment. While we can see Ethernet getting there at some point, the more time that passes, the further out that "some point" seems to get. Who Has Said What? ------------------ *Cisco ("CSCO")and IBM ("IBM") jointly submitted the use of SCSI over TCP/IP to the Internet Engineering Task Force (IETF). It is believed that the new protocol could be used to network storage over Ethernet. *Lucent ("LU") and Gadzoox ("ZOOX") recently teamed up and submitted a specification to the IETF in an effort to interconnect Fibre Channel SANs (Storage Area Networks) by "tunneling FC through IP networks". *Adaptec ("ADPT") has been working on developing a protocol that couples SCSI with IP. The new protocol is referred to as STP (Storage Transfer Protocol) and hopes to use existing Ethernet networking equipment to network storage (i.e. Cisco routers and switches). *Alacritech's (private company) solution is a more robust Network Interface Card (NIC) which hopes to move data across LANs (i.e. non-storage traffic) more efficiently by off loading much of the TCP/IP protocol processing onto a NIC. Alacritech is not a storage solution, per se. Cisco's SCSI Over TCP Stacked With IP ------------------------------------- On March 6, 2000, Cisco and IBM jointly submitted the use of SCSI over TCP/IP to the IETF. A consensus vote was anticipated on March 29, following which we expected a working group would be established to further develop the new protocol. But, nothing has happened since the filing? In the end, industry experts agree that even if Cisco decided today that it was going to go with SCSI over TCP/IP with full force, it would take at least 2-3 years for it be ready for prime time and compete head-to-head with today's FC. Adaptec Launched EtherStorage ----------------------------- We believe one of the key reasons Adaptec has tended to remain on the FC sidelines is because of its belief that SCSI is just as good, if not better. (Note: FC uses an encapsulated SCSI protocol referred to as Fibre Channel Protocol "FCP"). What Adaptec has been working on over the past 2-3 years is taking SCSI a different route by coupling it with Ethernet's IP protocol. Adaptec believes that by coupling SCSI with IP (rather than TCP, which is the protocol most often coupled with IP through Ethernet in the LAN), one only needs minor tweaking in order to network storage over existing Ethernet networking equipment (i.e. Cisco routers and switches). The new protocol has been referred to as STP (SCSI Transfer Protocol or Storage Transfer Protocol or SAN Transport Protocol). So will you get all the advantages of SCSI (robust block level transmissions) combined with the benefits of Ethernet networking (inexpensive, well understood technology that is readily available)? Not really. STP requires a more robust HBA (Host Bus Adapter), adding cost. It also requires the appropriate target (adding cost), which can be imbedded in RAID or added as an external converter. In other words, SCSI has to be converted into STP/IP and then back to SCSI (two separate events). All this adds to complexity and cost. In time, with the proper support and development we could see how STP could be a viable storage networking technology for the low-end of the market. Adaptec agrees that this will take time (perhaps 2-3 years) and support from other storage subsystem vendors is essential (none are currently signed on). Note: Adaptec recently partnered with Agilent Technologies (ticker: "A") on 1/18/00 to co-develop, market and sell FC HBAs. It is our understanding that Adaptec plans to market EtherStorage to the low-end of the market and FC to the high-end of the market (enterprise). Alacritech ---------- Alacritech founder Larry Boucher recently launched a new line of NICs. Boucher's NIC does more than the average NIC. Boucher's NIC processes much of the TCP/IP stack, which typically soaks up more expensive computing capacities (also referred to as CPU cycles). Although there seems to be some resistance to increased NIC processing within the industry, Boucher believes adoption of the technology is inevitable. After many discussion with Boucher, we were surprised to find that he does not currently see storage networking as a use for his NIC. However, when we look at what Alacritech has to offer, it does seem to make TCP/IP perform more like FC. Note: Boucher is also the Chairman and founder of Adaptec and founder of Auspex ("ASPX"). Merger Mania: QLogic/Ancor -------------------------- Let the mergers begin! As we have been anticipating, mergers could be a great defense against Brocade's dominance in storage networking. We believe last week's announcement of the proposed QLogic ("QLGC") and Ancor ("ANCR") merger will prove to be one of the first steps in the "merger mania" that we believe will envelope storage networking companies. We also agree that the proposed merger could result in a stronger competitor to Brocade than Ancor has been in the past. Brocade Is The Clear Leader In Storage Networking ------------------------------------------------- We believe Brocade ("BRCD") is the clear leader in the storage networking industry with over a 70% market share in the FC switch segment (the sweet spot). We expect Brocade to 1) continue to beat consensus estimates, 2) continue to roll out new and innovative products and technologies, and 3) continue to announce broader technology partnerships. Brocade is scheduled to release its F2Q00 financial results Monday 5/15 after the market close. We are looking for revenues of $56.7 million, which we revised upward from $53.0 million mid-quarter, and EPS of $0.09 (the Street EPS estimate is $0.08). ---------------------------------------------------------------------------- ---ADDITIONAL INFORMATION AVAILABLE UPON REQUEST--- Salomon Smith Barney ("SSB"), including its parent, subsidiaries and/or affiliates ("the Firm"), usually makes a market in the U.S.-traded over the counter securities recommended in this report and may sell to or buy from customers, as principal, securities recommended in this report. The Firm or employees preparing this report may have a position in securities or options of any company recommended in this report. An employee of the Firm may be a director of a company recommended in this report. The Firm may perform or solicit investment banking or other services from any company recommended in this report. 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Come on ANCR/Q now is the time to shift the SAN!! |
