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McDATA Sates Hunger for Storage Software Assets

Confident in its belief that storage management software sales will bloom over the next few years from businesses desperate to backup loads of data, McDATA Corp. Wednesday snapped up a whole subsidiary devoted to that very sector.

The Broomfield, Colo.-based storage networking solution provider, which eschews the idea that storage software is all about disaster recovery for the notion that it should address security, availability and bandwidth issues, bought SANavigator Inc. for $29.75 million in cash from Western Digital Corp. . One-time costs associated with the asset acquisition are expected to be $2.5 million to $3 million, the majority of which is expected to be incurred in September of 2001.

The play supports McDATA's Enterprise Solutions Architecture and its commitment to bring customers integrated software solutions that simplify and optimize their core-to-edge enterprise storage networks. A key feature of SANavigator is the ability to view the entire network from a single interface.

The addition of SANavigator's software to McDATA's solutions addresses the needs of the storage network management market, which Gartner Dataquest expects to hit $13.4 billion by 2004, and simplifies the development of open storage networks by supporting McDATA's current software platforms -- Enterprise Operating System (E/OS) and Enterprise Fabric Connectivity Manager (EFCM). The latter consolidates the management of multiple devices on the McDATA fabric to a single console.

When the acquisition closes within the next month, Robert Wright, the current president and COO of SANavigator, will be vice president and general manager of SANavigator Inc., a wholly-owned subsidiary of McDATA. SANavigator Inc. will continue to be based in San Jose, Calif., and its software will be available to customers through both SANavigator and McDATA.

So where does a smaller company like McData fit into the overall storage sector where heavyweights such as EMC Corp., Brocade Communications Systems Inc., Veritas Software Corp. and IBM Corp. rule? It's complementary as opposed to competitive with the others, said McDATA spokesperson Kathleen Sullivan.

"EMC, VERITAS and others occupy the storage management space with the goal of 'virtualizing storage.' McDATA, on the other hand, is defining a new market," Sullivan told InternetNews.com. "It is called the storage network management market and our goal is to "virtualize the storage network fabric."

Why does Western Digital want to sell the software division? Well, despite the often-talked-about computer sales slowdown trend, it said it wants to concentrate on its PC hard-drive business.

The move is a piece of Western Digital's puzzle to reduce operating expenses and become a leaner, tighter ship. It recently reaped $5.5 million in external funding for its Keen Personal Media subsidiary and the sale of the assets of its Connex Inc. subsidiary to Quantum Corp.

Matt Massengill, president and CEO of Western Digital, explained it thusly in a public statement:

"While maintaining a lean operating model suited for the rigors of our core hard drive business, Western Digital remains committed to building business opportunities beyond the traditional desktop PC market by maximizing our core competencies. A good example of this would be our personal video recorder software expertise through Keen Personal Media. In the case of SANavigator, we were successful in developing a startup company with a strong set of SAN software capabilities, which McDATA is now best suited to nourish given its significant position in the SAN market and the rapid changes the SAN industry is undergoing."

The move is part of an industry-wide, ongoing trend in which high-tech firms are shedding weight to stay afloat. Even the heavyweights have gotten involved -- Gateway Inc. last week announced major restructuring and Motorola Corp. has sold two divisions in the last month or so.