Applied Micro Circuits Corp. is acquiring Fibre Channel host bus adapter (HBA) vendor JNI Corp. for approximately $190 million, or $7 per share of JNI stock. In terms of 2002 revenues, JNI was the fourth-largest vendor of Fibre Channel host adapters, behind Hewlett-Packard (including Compaq HBA revenues), QLogic, and market leader Emulex, according to International Data Corp. (see chart).
According to the Gartner/Dataquest research firm, the market for Fibre Channel HBAs is growing at a 31% compound annual growth rate.
JNI is known primarily as an HBA vendor for Solaris environments, with more than 90% of its revenues coming from Sun platforms. The company has been only a minor player in the Windows HBA market but was expected to ship a new HBA for Windows this month.
AMCC and JNI officials acknowledge the daunting task of competing with Emulex and QLogic, which in effect have a duopoly in the Fibre Channel HBA market. “QLogic and Emulex are formidable, but AMCC brings a lot of scale and muscle [to JNI],” says Dave Rickey, chairman, president, and CEO of AMCC.
In addition to marketing muscle, AMCC brings silicon expertise, particularly physical layer and multi-processor design experience that can be leveraged in HBAs. AMCC is primarily a manufacturer of high-bandwidth integrated circuits that are used in wide area network technologies. Products include switch fabric, traffic management, network processor, and framer/mapper devices.
AMCC is not a newcomer to the storage market. In the mid- to late 1990s, the company manufactured Fibre Channel port bypass circuits, re-timers, and SERDES devices but exited that market in 1999 to focus on the telecommunications market.
With the JNI product line, AMCC’s target markets include OEMs as well as IT organizations.
The company plans to introduce 4Gbps Fibre Channel products, as opposed to skipping ahead to 10Gbps HBAs, while acknowledging that it’s still unclear which way the market will go. “The jury is still out on 4Gbps, although there are a lot of good reasons for going to it,” says Russell Stern, JNI’s president and CEO. “For example, 4Gbps products will be compatible with 1Gbps and 2Gbps products. In contrast, 10Gbps will not be backward-compatible.”
In addition to Fibre Channel HBAs, JNI also manufactures InfiniBand host channel adapters (HCAs) and software. Although the InfiniBand market has for the most part failed to materialize, JNI has one large customer for its InfiniBand HCAs: Network Appliance.
AMCC will operate JNI as a division and will retain the JNI brand name. Both companies are headquartered in the San Diego area.