Emulex, QLogic May Face HBA Competition

Could QLogic and Emulex soon face real competition in the host bus adapter (HBA) space?

It’s apparently enough of a possibility that two Wall Street firms put out notes on the issue this week.

Merrill Lynch said there is speculation that Applied Micro Circuits could win an HBA deal with EMC . Emulex derives 17% of its revenues selling HBAs to EMC, but Merrill said it sees little near-term risk to Emulex, just “headline risk.”

Applied Micro and EMC officials declined to comment on the reports.

In research notes on Emulex and QLogic, Susquehanna Financial Group enterprise storage analyst Kaushik Roy noted concerns that “competitors could break into the HBA duopoly, and storage OEMs could pressure HBA suppliers to cut prices.”

“Given the lengthy and resource-intensive qualification process for HBAs and the reluctance of customers to buy anything but qualified HBAs, we believe
the OEMs should still be fairly dependent on QLogic and Emulex, even if others, such as LSI Logic, Applied Micro, or ATTO Technology, were to offer dramatically reduced pricing,” Roy wrote.

Still, EMC has been known to seek price concessions, most notably with its offspring McDATA . And Dell and EMC apparently sought help on pricing from HBA and switch vendors for the companies’ planned low-end SAN offering.

Emulex and QLogic dominate the HBA space with about 80% market share, according to Gartner. HP, which supplies products for internal use, is third.

AMCC acquired HBA technology this past October when it snapped up JNI Corp., and now it appears that AMCC may have greater ambitions for JNI.

One storage industry analyst thinks AMCC has potential in the HBA space.

“I am very bullish on AMCC’s management team and think that they will be a major HBA player,” says Tony Asaro of the Enterprise Storage Group’s ESG Lab. “AMCC bought out JNI, and they had good relationships with the various OEMs. They did not share with me the progress that they were making with any of them, but they are talking to all of them.”

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