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Cisco draws a line in the SAN

Cisco Systems has finally made its long expected move into the burgeoning storage area network (SAN) market with the recent announcement of a definitive agreement to acquire privately held data storage equipment maker Andiamo Systems Inc. The San Jose, Calif.-based networking giant disclosed the acquisition in tandem with the introduction of its MDS 9000 multiprotocol SAN switch family, which is based on Andiamo technology.

This acquisition represents Cisco's entry into the large, high-growth Fibre Channel SAN switching market. And it comes as no surprise. Cisco has maintained an extremely close relationship with the company since it was founded in 2001. An early investor, Cisco owns a 44-percent stake in Andiamo, for which it reportedly paid $74 million. Cisco even houses the 270-person operation on its own San Jose campus. Cisco already has IP storage and metro optical SAN connectivity products that are complementary to the Andiamo products, according to the company.

''This acquisition supports Cisco's strategy to enter into new growth markets, such as storage networking, where we believe we have the potential to be the number one or two player,'' said Cisco CEO John Chambers.

Cisco will acquire the rest of Andiamo by July 2004 at a price to be determined based on market milestones, according to the agreement. The deal is expected to close in the third quarter of Cisco's 2004 fiscal year. Andiamo CEO Buck Gee, is expected to join the Cisco Storage Technology Group once the acquisition is completed. Cisco's right to acquire Andiamo, and a summary of the transaction's basic terms, were disclosed in Cisco's 10-Q filed in March of this year.

SANs connect multiple servers to a centralized pool of disk storage. The servers are treated as a single resource, providing users with a simpler way to see and manage vast quantities of data. The networks can be centralized or distributed. For network administrators, disk maintenance and routine backups are easier to schedule and control. Analysts at the Gartner Group expect the burgeoning SAN market to grow from $1.2 billion in 2002 to $4.3 billion in 2006.

According Gartner, Cisco's two chief competitors in the SAN market are likely to be Brocade Communications Systems Inc. of San Jose and McData Corp. of Broomfield, Colo. Analysts said Brocade is currently the leading Fibre Channel switch vendor with annual revenues exceeding $500 million. McData follows with revenue of about $350 million. Gartner expects the Fibre Channel switch market to grow from $1.2 billion this year to about $4.3 billion in 2006. McData expects to ship a 140-port Fibre Channel switch this fall. It will also demonstrate iSCSI and FCIP interfaces this fall and put them into products next year, according to the company.

Cisco's MDS 9000 multiprotocol switches are offering some new features, the company said, including support for Fibre Channel, Small Computer Systems Interface over IP (iSCSI) and the FCIP tunneling protocol, as well as virtual storage-area networks and new Fibre Channel diagnostics. Cisco said that it is working to certify its products with a number of companies that make storage arrays, server adapter cards and applications, including Adaptec, BMC Software, Hitachi Data Systems, IBM, Tivoli, JNI Corp., Qlogic and Veritas. The new switches are set to ship at the end of the year, the company said.

About the Author

John K. Waters is a freelance writer based in Silicon Valley. He can be reached at john@watersworks.com.

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