Brocade Takes the Lead

Brocade’s merger with McData was just enough to give the Fibre Channel switch maker the lead in the high-end modular storage switch market, according to Dell’Oro Group’s first quarter 2007 SAN Report.

Brocade sold $95.4 million of high-end SAN switches in the first quarter of 2007, good for a 51.1 percent share of the market and edging out Cisco’s 47.6 percent share. The only other vendor to register in the quarter was QLogic at 1.1 percent — but that was double the vendor’s performance in the fourth quarter of 2006.

In the fourth quarter, Cisco had garnered 42.8 percent of the modular switch market, Brocade 31 percent and McData 25.6 percent, according to Dell’Oro Group.

The overall SAN switch market was $387.4 million in the first quarter, up about 2 percent from the first quarter of 2006, but down 14 percent sequentially from the fourth quarter, in part because $20 million of Brocade’s service revenues were broken out separately. Normal seasonality and pricing pressures also contributed to the sequential decline, although Dell’Oro noted that weakness continued into the second quarter, with flat-to-down guidance from the likes of Brocade, NetApp and the drive makers.

Strength in low-end fixed switches also contributed to the sequential sales decline, since the price per port of fixed switches is typically half that of modular ones, according to the analysts.

Prices declined about 11 percent in the first quarter, Dell’Oro said, as Cisco and Brocade battled for market share and Cisco discounted its older fixed switches to clear its distribution channels for the MDS 9124. Overall port shipments were up 11% sequentially.

Brocade owns about a two-thirds share of the overall Fibre Channel switch market, while Cisco owns about a quarter of the market.

Dell’Oro analysts said the proposed Fibre Channel over Ethernet (FCoE) standard could be adopted rapidly if HBAs supporting both technologies are priced competitively. FCoE could also create a new category of Ethernet switches with advanced features such as FC packet handling.

Cisco will report its second-quarter results next week, and Brocade will report the week after.

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