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Technology Stocks : Brocade Communications Systems,Inc. (Nasdaq-BRCD) -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (1304)	1/15/2003 1:59:30 AM
From: E_K_S	Respond to of 1583

Hi Lizzie - OEM is also referred to as "Original Equipment Manufacturer". What is interesting is that todays press release from Brocade (http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=SVBIZINK3.story&STORY=/www/story/01-13-2003/0001870639&EDATE=MON+Jan+13+2003,+08:22+AM) stated that this is an "expansion of its (previous) reseller agreement" and Sun will now make Brocade SilkWorm(R)Fibre Channel fabric switches available through its reseller and direct sales channels worldwide. Their prior reseller agreement (http://www.internetnews.com/storage/article.php/782691) which started back in June 2001 "allowed Sun to resell, service and support Brocade SilkWorm(R) fabric switches worldwide in qualified configurations". It appears that the old agreement was quite limited in the scope and products that Sun was allowed to resell. Most of the revenues generated by Sun from their storage division are from their Professional Services division that include technical support and consulting services (designing open SAN systems). Sun has had limited success in the past selling their own proprietary OEM storage products and have shifted their revenue model recently to focus on software and services and other reoccurring service contract revenues. Sun currently OEMs switches from Qlogic at a cost of around $700 per port which is a bit lower than similar switches built by Brocade. It's a very competitive business and the hardware margins are getting thin. Each new generation of products provide new features and more available ports that make the cost per port much less. In fact there is a rumor that Brocade is ready to release a 256 port switch in the near future (I do not know but this was posted on the Yahoo board). My point is that for these companies to make significant profits, the key IMO will be in their (1) customer service and support contracts and (2)annual license fees for their proprietary enterprise storage/administration software. Do you know how much revenue Brocade generates from their service and consulting organization? I wonder if their expanded reseller agreement with Sun provides for any annual service or maintenance revenues? Finally, I will be looking at this Rhapsody merger to see if there might be the potential for new revenue streams from licensing their VSAN storage management software intellectual property. Specifically I am thinking about Sun, HP or even Veritas. Why reinvent the wheel if it is provided at a reasonable fee and you are already a major reseller of the product? EKS