McData Buys Up Competitors

The high-end storage switch maker acquires Sanera for approximately $102 million and Nishan for about $85 million.

High-end storage switch player McData Corp. Monday executed on its stated intention to acquire smaller competitors, landing Sanera Systems Inc. for approximately $102 million and Nishan Systems Inc. for approximately $85 million.

McData, which also has invested $6 million in startup Aarohi Communications Inc., will assume $2 million of Nishans debt and will spend up to $1.7 million for employee retention over the next two years, officials in Broomfield, Colo., said.

Sanera, of Sunnyvale, Calif., makes a 256-port storage switch called the DS1000. The only other switches of Saneras scale are the 224-port Multilayer DataCenter Switch 9509 from Cisco Systems Inc., of San Jose, Calif., and the 256-port FC/9000 from the Inrange division of Minneapolis-based Computer Network Technology Corp. McDatas largest product, the Intrepid 6140, has just 140 ports.

San Jose-based Nishan makes storage-over-IP products for replications and for connecting stranded servers.

Aarohi, also of San Jose, is developing switch-on-chip technologies it calls FabricStream, officials said.

McData Monday also announced its second-quarter earnings results. The company had revenues of $107 million, up from $103.2 million a quarter ago and $77.3 million a year ago. Income was $9.1 million, up from $5.3 million a quarter ago and from a loss of $3.9 million a year ago.

"With todays strategic announcements, we are in a fundamentally stronger position to accelerate the growth of our company and to fully capitalize on the expanding market opportunity," John Kelley, CEO and president, said in a prepared statement.

McData anticipates revenues in the range of $105 million to $110 million for the third quarter ending Oct. 31, officials said. The current SANavigator and Enterprise Fabric Connectivity Manager software will support the newly acquired technologies, they said. McData also now has a seat on Aarohis board of directors.

McData expects to have new products using the acquired technologies by the end of 2004, Peter Dougherty, vice president of business development and strategic alliances, said in an interview. It would have taken McData until 2005 to reach the 200-port range on its own, but the company will now focus on adding Fibre Connect (Ficon) and software to make Saneras product more enterprise-worthy, he said. With existing partner company Nishan, McData will gradually transition its products to Fibre Channel over IP (FCIP), from Nishans current and less popular Internet Fibre Channel Protocol (iFCP). Nishan has 140 customers.

On the Aarohi side, McData will ship a software developers kit, Dougherty said. In total, McData gains about 200 employees, he added.