SAN sales soft, but 2H looks bright

Posted on September 13, 2005

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By Dave Simpson

—According to a recent report from the Dell'Oro Group research firm (www.delloro.com), sales of SAN components such as switches and host bus adapters (HBAs) were soft in the second quarter (the most recent period for which figures are available), but a variety of factors point to an upbeat second half of the year.

SAN switch revenues decreased 8% in Q2 versus Q1, to $308 million, while HBA revenues were essentially flat at $205 million. Compared to Q2 2004, switch sales were about the same while HBA revenues increased 20%.

Although revenue figures were lackluster, port shipments increased impressively vs. Q2 2004, reflecting intense pricing pressure. For example, switch port shipments increased 26% while HBA port shipments increased 41%.

Dell'Oro analysts see a number of factors leading to a resurgence in SAN component revenues in the second half of this year and into 2006. One of these is an expected surge in sales of blade servers which, when connected to SANs, require specialized HBAs and embedded switches.

Although sales of blade servers were down for the second consecutive quarter in Q2 2005, year-over-year volumes grew significantly. IBM, for example, reported a 65% increase in blade-server sales in the second quarter compared to the same period in 2004.

As blade-server shipments ramp up again, the Dell'Oro Group predicts increased demand for bladed HBAs (sometimes referred to as mezzanine adapter cards) and embedded switches.

QLogic (HBAs and switches) and Brocade (switches) jumped out in front early in the market for blade-server add-ins, and Emulex (HBAs and switches) more recently joined the fray.

According to the Dell'Oro Group, QLogic's sales of switches for blade servers ("switch blades") increased 45% from Q1 to Q2 2005. QLogic makes switches for blade servers from vendors such as Hewlett-Packard, IBM, and Intel. QLogic is also partnering with McData to provide embedded Fibre Channel switches for blade servers and to provide interoperability between the two vendors' switch lines. And QLogic's HBAs are resold by blade server vendors such as Egenera, Hewlett-Packard, IBM, Intel, and RLX.

Emulex is shipping Fibre Channel HBAs for use in blade servers from vendors such as Hewlett-Packard, IBM, and NEC.

Brocade has developed switches for blade servers from Hewlett-Packard and IBM, which are the top two blade server vendors.

In a twist on the blade server add-in theme, most of which centers on Fibre Channel components, SANRAD in July announced plans to develop a version of its iSCSI V-Switch for IBM's eServer BladeCenter, providing iSCSI connectivity for blades. The V-Switch can be used to pool Fibre Channel, SCSI, or iSCSI disk systems.


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