Category Archives: Brocade

Cisco: The Merchant-Silicon Question

As reported by MarketWatch yesterday, Lazard Capital analyst Daniel Amir has written a note suggesting that Cisco Systems, “long a proponent of in-house solutions, has begun the shift to off-the-shelf Broadcom parts.”

Amir added that he expects Broadcom and, to a lesser extent, Marvell to benefit from Cisco’s move to merchant silicon, as well as from an intensification of an industrywide trend toward off-the-shelf parts.

Staying the ASIC Course

Many of Cisco’s networking rivals already have made the switch to merchant silicon. Cisco, along with Brocade Communications, has stayed the course with custom ASICs, believing that the in-house chip designs confer meaningful proprietary differentiation and attendant competitive advantage.

It’s getting harder for Cisco to make that case, though, as the company suffers market-share losses and margin erosion at the low end of the switching market, which is being inexorably commoditized, and as it also meets increasingly strong competitive headwinds from vendors such as Juniper Networks and Arista Networks in the some of the largest and most demanding data-center environments.

As Cisco’s recently announced layoffs attest, the company is under unprecedented pressure from shareholders to reduce costs. It’s also under the gun to raise its top line, but that’s a tougher problem that could take a while to remedy.

Need to Cut Costs

On the cost front, though, Cisco clearly cannot jettison employees indefinitely. It needs to look at other ways to reduce capital and operating expenditures without compromising its ability to get back on a sustainable growth trajectory.

Given the success of its competitors with off-the-shelf networking chips, one would think Cisco would stop swimming against the merchant-silicon tide. It’s likely that merchant silicon would help reduce Cisco’s development costs, allowing it to at least mitigate the margin carnage it’s suffering at the hands of HP and others in an increasingly price-sensitive networking world.

But even though Amir suggests that Cisco’s apparent dalliance with merchant silicon might not be a “one-time experiment,” it’s not a given that Cisco will ardently transition from home-brewed ASICs to off-the-shelf chips.

Mixed Signals

Just last month, Rob Soderbery, senior vice president and general manager of Cisco’s Unified Access business unit, contended that Cisco’s profits and market share in switching revenue might be taking a hit, but that it was holding its own it port-based market share. What’s more, Soderbery made the following statement regarding whether Cisco was considering adoption of merchant silicon over its custom ASICs:

 “There’s tremendous scale in our portfolio. We have competitive ASIC development. We always evaluate a make/buy decision. ASIC development is a core part of our strategy.”

Maybe Cisco, upon further review, has decided to change course, or perhaps Amir has misread the situation.

Next Setting Sun?

Nonetheless, EtherealMind.com’s Greg Ferro argued persuasively earlier this year that merchant silicon will dominate the networking-hardware market. If you haven’t read it, I advise you to read the whole piece, but here’s a money-shot excerpt:

 “I have the view that Merchant Silicon will dominate eventually, and physical networking products will become commodities that differentiate by software features and accessories – not unlike the “Intel server” industry (you should get the irony in that statement). As a result, any argument between “which is better – merchant or custom” is just matter of when you ask the question.

One interesting feature is that John Chambers continue to publicly state that custom silicon is their future. The are parallels with Sun Microsystems who continued to make their own processors in the face of an entire market shift, and that doesn’t appear to have worked out very well. In this another wrong footed innovation from Cisco? Time will tell.”

Besieged now by its shareholders as well as by its competitors, Cisco CEO John Chambers and his executive team are finding that time does not appear to be on their side.

Dell Might Announce Networking Acquisition Next Week

As those of you who regularly visit this dusty outpost of the blogosphere will know, I recently took a shot at handicapping which networking company Dell might acquire. I assembled a field of nine entries, considered the likelihood that Dell would pursue a transaction with each of them, and assigned odds to each scenario.

Before writing that post, I had read and heard mounting speculation about the increasing likelihood of Dell buying its way into networking to consummate and round out integrated data-center solutions (servers, storage, networking) and to compete more effectively against competitors HP and Cisco.

The drumbeat for a networking acquisition by Dell has only gotten louder and more insistent since then. Now the word on the street — and in the pubs, in the cafes, on the patios, at the gyms, and on the fairways — is that Dell might announce its networking buy as early as next week.

Furthermore, multiple sources, spanning the gamut of reliability, tell me that the company Dell will buy is the one I listed as the 5-2 favorite in my mildly diverting handicapping exercise.  (The candidate I listed at 7-2 was alleged to have been in the running, too.)

Nothing is a given, of course, until the announcement goes out over the wires, but the word is that Dell has made its choice, going with the favorite, and will tell the world all about it imminently.

Maybe I should shorten the odds accordingly.

Handicapping Dell Networking Acquisition Candidates

There’s a strong possibility that Dell will make a networking acquisition in the near future. In the spirit of fun, I thought it would be mildly entertaining, and perhaps edifying — though I don’t want to push it — to handicap the field of potential candidates, providing morning-line odds for each vendor.

Brocade 5-2

I addressed the Dell-Brocade scenario in a previous post.

Even though there are reasons Dell might not pursue Brocade, the company is a logical candidate and should be considered the favorite. As any gambler can tell you, however, favorites don’t always win, and there’s a chance Dell will look elsewhere in the field for its networking play.

Juniper Networks 7-1

Dell resells Juniper’s enterprise switches and security boxes under its own PowerConnect brand, but a lot of what Juniper offers, particularly routers to carriers and service providers, isn’t a Dell priority.  What’s more, Juniper would prefer to remain independent, has other major partnerships (especially with IBM), and believes it is well placed to take share from Cisco at carriers and service providers as virtualization proliferates and cloud computing takes hold.

Last, but probably not least, Juniper’s market capitalization, at more than $16 billion, makes it prohibitively expensive. Dell’s cash hoard amounts to more than $14 billion, but I doubt it wants to break the bank  on a single transaction.

Aruba Networks 10-1

Dell sells Aruba’s wireless networking solutions under the Dell PowerConnect W-Series. Aruba is seen to benefit from continued growth in enterprise wireless networking. Still, Dell is probably happy to leave the relationship as it stands.

Enterasys 12-1

The two companies were active partners several years back, but not much is happening today. Not likely.

 Arista Networks 7-1

Michael Dell is enthusiastic about the prospects for 10GbE and cloud computing. Arista probably isn’t willing to sell, but my guess is that Dell — seeing Arista’s gains against Cisco in financial services, with more possibly to come in other verticals — would be interested.

That said, Arista seems destined for an IPO. The company’s CEO Jayshree Ullal has said she is asked often by customers about Arista’s exit strategy, and she replies that the company’s plan is to remain independent.

Extreme Networks 6-1

Extreme and Dell have an existing partnerships, with the former’s switches supporting Dell’s EqualLogic iSCSI SAN arrays. Extreme also has the 10GbE  switching of which Michael Dell is so enamored.

Extreme isn’t an industry leader, and it’s still struggling for traction in a competitive marketplace, but it’s active in many verticals where Dell is strong — including healthcare — and Dell might feel it could do relatively well with such a cost-effective purchase. (Extreme’s market capitalization is $314 million.) It could be a good way Dell to make a modest entry into networking, though it would create complications with existing partners.

 Force10 Networks  7-2

Dell partners with Force10 for Layer 3 backbone switches and for Layer 2 aggregation switches. Customers that have deployed Dell/Force10 networks include eHarmony, Salesforce.com, Yahoo, and F5 Networks.

Again, Michael Dell has expressed an interest in 10GbE and Force10 fits the bill. The company has struggled to break out of its relatively narrow HPC niche, placing increasing emphasis on its horizontal enterprise and data-center capabilities. Dell and Force10 have a history together and have deployed networks in real-word accounts. That could set the stage for a deepening of the relationship, presuming Force10 is realistic about its market valuation.

 F5 Networks 8-1

Dell is the largest reseller of F5 products, and the relationship clearly is working for both companies. Dell resells not only F5’s flagship BIG-IP application-traffic controller, but also the company’s ARX file-virtualization appliance.

Dell and F5 have a great partnership, but I think Dell believes F5 isn’t going anywhere — it will likely remain independent, despite the perennial rumors that it could be acquired — and will agree to leave well enough alone.

Riverbed Technology 8-1

Riverbed and Dell are partners, with Riverbed’s Steelhead WAN-optimization appliances and Dell EqualLogic PS Series iSCSI SAN arrays deployed together in disaster-recovery and centralized data-backup applications.

The relationship works, Dell has other near-term priorities, and an acquisition of Riverbed would be relatively pricy and still leave Dell with networking gaps.

Any Others? 

It’s possible Dell will look elsewhere, perhaps at an emerging niche player, so I’ll leave the field open for late entrants. If you think any should be included, let me know.

Dell: Brocade and CommVault Rumors Redux

 
Dell is sitting on more than $15 billion in cash and investments, and we should expect that the diversifying computer mainstay will tap that money in pursuit of further acquisitions in 2011.

Brocade: A Reasonable Target for Dell

I have heard repeatedly that Dell wants to make a networking acquisition. The most logical target, given Dell’s increased storage profile in recent years, is Brocade Communications. Dell already resells Brocade’s Fiber Channel SAN switches, and Brocade’s technology plays well with Dell’s earlier acquisition of Compellent Technologies. An acquisition of Brocade would boost Dell’s margins, allowing it to become a vendor, rather than a reseller, of SAN switches.

There’s considerable logic supporting a Dell acquisition of Brocade, but there are some reasons to think it won’t happen, too. Brocade has a current market capitalization of about $3.15 billion, and it’s not unthinkable Dell would have to offer at least $4 billion to seal a deal.

Big Deal, Big Risks

The larger the deal, the bigger the risk that integration and assimilation won’t go smoothly. Dell would prefer smaller, digestible deals, and Brocade could result in acquisitive indigestion. Additionally, even though there’s technological logic underlying a potential Dell bid for Brocade, the market and channel profiles of the two companies are not perfectly aligned and could result in post-merger complications.

Furthermore, recent indications within Brocade suggest a sale of the company isn’t necessarily imminent. Its now-former CFO, Richard Deranleau, left the company recently to “pursue other interests.”  Seemingly knowledgeable observers believe Deranleau would have stuck around if a deal for the company had been in the works.

Let’s also remember that Brocade isn’t exactly a new focus of takeout rumors. Every few months, if not more frequently, Brocade is said to be on the block or on the cusp of an impending acquisition. Those deals did not develop, and it’s possible the latest flurry of Dell rumors will fall into the same uneventful bucket.

OEM Entanglements

One reason Brocade might have remained on the shelf, to speak, might involve the nature of its OEM agreements with vendors that include not only Dell but also IBM, HP, EMC, Oracle, Hitachi, Fujitsu, among others. It’s top three OEM resellers — HP, IBM, and EMC — account for about half the company’s revenue.

It’s reasonable to assume that those companies might have included language in their OEM contracts with Brocade that protect themselves and their customers from potentially injurious consequences resulting from Brocade being merged with or acquired by another vendor. Citi analyst John Slack is among those who have contended that Brocade’s existing OEM agreements might cause difficulties for a buyer of the company.

That said, as mentioned above, Brocade would be a reasonable addition to Dell’s storage-centric strategic buildout. It makes sense technologically, and could happen, but that doesn’t mean it will.

CommVault Rumors Return

Meanwhile, CommVault has been perennially rumored to be a Dell acquisition target. Again, it’s a plausible scenario. Dell is a major reseller of CommVault’s Simpana data-management software, accounting for 23 percent of the company’s revenue. Just as in the case of Brocade, Dell could improve its margins significantly by directly selling those products to its channel partners and customers rather than functioning as a reseller.

But the rumor about Dell acquiring CommVault has circulated, quite literally, for years. If Dell wanted to lock up CommVault, it could have done so before now, at a price more favorable than CommVault’s current market capitalization of more than $2 billion. (And, in any deal that might transpire, CommVault would negotiate a significant premium over its current market cap.)

Unless, of course, CommVault wasn’t open to acquisition proposals. Some contend CommVault will be even less amenable to acquisition now that it has struck a potentially lucrative OEM deal with NetApp. If Dell finally wishes to consummate a deal with CommVault, it might be forced to pay a relatively hefty price.

Virtualization Still Calls Data-Center Tune

As the latest VMworld begins its transformation from current event to memory, now probably is as good a time as any to reflect on what it all means, if anything, for the future of data centers, the IT industry, and various big-name vendors.

There has been a lot of talk about public, private, and hybrid clouds at VMworld, but I think that’s something of a side issue. Yes, certain enterprises and organizations will partake of cloud services, and, yes, many enterprises will adopt a philosophy of IT as service within their data centers. They’ll make data-center management and automation decisions accordingly.

Even so, at a practical level, it is virtualization that continues to drive meaningful change. The  robust growth of virtualization has introduced problems (optimists would call them opportunities), too. How do you automate it, how do you manage it, how do you control it so that it remains a business asset rather than a potential liability?

Reciprocal Choking

At a fundamental level, that’s the big problem that data centers, whether within enterprises or service providers, must solve. The ultimate solution might involve data- center convergence — the integration and logical unification of servers, storage, networking, and orchestration — but it’s not clear whether that is the only option, or whether the price of vendor lock-in is worth the presumed benefit. Most enterprise customers, for the time being, will resist the urge to have one throat to choke, if only because they fear the choking might be reciprocal.

Indeed, as the vendor community has reacted to the popular appeal of data-center virtualization, the spectacle has been fascinating to watch. Who will gain control?

It’s not a simple question to answer, because the vendors themselves won’t have the final say; nor will the industry’s intelligentsia and punditry, formidable as they may be. No, the final arbiters are those who own, run, and manage the data centers that are being increasingly virtualized. Will network managers, or at least those with a strong networking sensibility, reign supreme? Will the leadership emerge from the server, application, or storage side of the house? What sorts of relationships will  these customers have with the vendor community, and which companies will serve as trusted counsel?

Ownership of Key Customer Relationships

As virtualization, by necessity, breaks down walls and silos, entirely new customer relationships will develop and new conversations will occur. Which vendors will be best positioned to cultivate or further develop those relationships and lead those conversations?

Meanwhile, vendors are placing their bets on technologies, and on corporate structures and strategic priorities. HP is an interesting case. Its Enterprise Servers Storage and Networks (ESSN) seems increasingly titled toward storage and servers, with networking — though not an insignificant consideration — relegated increasingly to a commoditized, supporting role. Just look at the executive management at the top of ESSN, both at HP headquarters and worldwide. You’ll notice an increasingly pronounced storage orientation, from Dave Donatelli on down.

Cisco, meanwhile, remains a networking company. It will try to imbue as much intelligence (and account control) as possible into the network infrastructure, even though it might be packaged under the Unified Computing Systems (UCS) moniker. That might not be a bad bet, but Cisco really doesn’t have a choice. It doesn’t own storage, is a relative neophyte in servers, and doesn’t have Oracle’s database or application pedigree.

Dell’s Move

IBM and Dell will be interesting to watch. Dell clearly places a lot of emphasis on owning its own storage technology. It has its own storage offerings right up through the midrange of the market, and it tried hard to buy 3PAR before being denied by a determined HP, which had its own reasons for winning that duel.

Questions remain over the importance Dell attaches to networking. We should learn soon enough whether Dell will continue to partner, with Juniper and Brocade, or whether it will buy its way into the market. To the extent that Dell continues to maintain its networking partnerships, the company effectively will be saying that it deems networking a secondary priority in its data-center strategy. IBM already seems to have made that determination, though there’s always a possibility it will revisit its earlier decision.

This puts Juniper in an interesting position. It needs to continue to push toward its Project Stratus intelligent flat network, thereby enhancing its value to customers and its importance to Dell and IBM as a partner. Brocade faces a similar challenge in storage networking, though it still seems to have a lot of work ahead of it in repositioning the Ethernet-switching portfolio it obtained through its acquisition of Foundry Networks.

Microsoft Pays for Inattentiveness

I have not mentioned Microsoft. VMware threw down a gauntlet of sorts earlier this week when it suggested that the importance of Windows as an operating system had been undercut severely by the rise of virtualization. For the most part, I agree with that assessment. Microsoft has some big challenges ahead of it, and it has been attempting to distract us from its shortcomings by talking a lot about its cloud vision. But a vision, no matter how compelling, is thin gruel if it is not supported by follow through and execution. In virtualization, Microsoft was caught flat-footed, its gaze averted by commotion outside the data center and the enterprise, and it is paying a steep price for that inattentiveness now.

Even though marketing hype has pivoted and tilted toward the cloud, virtualization continues to recast the data center.

Before Foxconn, Huawei Had Its Own Suicides

Long before the rash of deaths at the Foxconn Technology Group’s manufacturing facilities in China, another company fought to stem a wave of suicides at its Chinese operations.

That company was Huawei Technologies, and its problem with suicidal employees was covered in the media, though not as extensively as were the unfortunate events at Foxconn, part of the Hon Hai Precision Industry Co., Ltd.

What partly accounts for the difference in degree of coverage, I think, is Foxconn’s connection to Apple. As we all know, Foxconn manufactures Apple’s iPhones and iPads as well as computing devices for a number of other vendors, including Dell. Everything Apple touches is high profile, so it’s no wonder that the Western media gravitated to the Foxonn suicides once  Apple was discovered among Foxconn’s brand-name customers.

Another factor, though, might be the intense secrecy that surrounds Huawei. It’s a privately held company, shrouded in mystery, run by CEO Ren Zhengfei, who emerged from the People Liberation Army (PLA), is a member in good standing of the Communist Party of China, and is said to retain close ties to China’s defense and intelligence elite.

Still, the suicides at Huawei are a matter of public record. They began ramping in the year 2000 and continued well into the decade, seemingly coming to an end — or something like one — by 2008. At their peak, they were bad enough that Ren Zengfei wrote the following to another member of the Communist Party:

“At Huawei, employees are continuously committing suicide or self-mutilation. There is also a worrying increase in the number of employees who are suffering from depression and anxiety. What can we do to help our employees have a more positive and open attitude towards life? I have thought about it over and over again, but I have been unable to come up with a solution.”

This is not exactly the sort of pitch a human-resources executive wants to feature in employee-recruitment campaigns. Nonetheless, it demonstrates that Ren recognized the problem and was thinking hard about whether his company’s “wolf culture” and “mattress culture” were sustainable models on which to build a business that could scale and compete successfully against the world’s leading telecommunications-equipment and data-networking companies.

A few reports. which are disputed, suggest as many as 38 Huawei employees died from their own hand or from exhaustion during the past decade. Like Foxconn, Huawei experienced horrific on-site suicides, in which an employee typically would throw himself to his death from the balcony of a campus building.

Some commentators have noted that the suicide rate at Foxconn is not inordinately higher than China’s overall suicide rate. Some have even argued that the rate of self-destruction at Foxconn is lower than China’s rate, even going so far as to make the claim that working at Foxconn reduces the risk of suicide for Chinese employees.

Numbers can be sliced and diced, and they can be interpreted in a number of ways. As always, one should verify the accuracy of the source data and carefully check for an inherent statistical bias. I don’t have time to chase that thread now.

So, putting aside that debate, I want to consider another aspect of these stories: the incidence of at-work suicides at both Foxconn and Huawei. The instances of on-site suicide are well documented at both companies.

Perhaps I’m missing something — let me know whether I am — but I don’t believe there ever was a similar outbreak of suicides at technology firms in North America. Cisco, to the best of my knowledge, hasn’t seen its employees leaping to their deaths from the outdoor patios on Tasman Drive in San Jose. I don’t think we’ve seen anything of that sort at Juniper Networks or Brocade — or even Nortel Networks, where people have had considerable reason for despondence in recent years.

Workplace suicide is a dramatic act. It sends a powerful message. The victim makes a statement in not only how he chooses to kill himself but where he chooses to do it.

Ren Zhengfei was right to rack his brain in search of a solution to the morale problem at Huawei. However, as recent events at Foxconn and at other Chinese companies demonstrate, it isn’t a company-specific problem.

As China attempts to move up the technology value chain, from low-cost manufacturing to R&D-led innovation, it will have to find ways of motivating its employees with carrots instead of sticks.

How Brocade Might Connect with Hitachi’s UCP

Hitachi has been said to practice passive — even stealth — marketing. Whatever you call the company’s approach to self-promotion, you’d probably agree that it tends to hide its light under a bushel, at least here in North America, where the company tends to be perceived as an industry afterthought.

That’s why I don’t feel particularly bad about my abject ignorance of Hitachi’s portfolio of networking products, produced through a joint venture with NEC called Alaxala Networks Corporation. Apparently, according to information on Alaxala’s website, Hitachi owns 60 percent of the company and NEC holds the remaining 40 percent.

I was not alone in being in the dark about Hitachi’s status as a purveyor of network infrastructure. Considering that some of Hitachi’s own employees don’t seem to know about this arrangement, I am in relatively good company.

It’s obvious that Hitachi, despite the existence of Alaxala, hasn’t vaulted to the top of the enterprise-networking charts in North America, or in most other parts of the world.

Still, Alaxala could be an important ingredient in Hitachi’s answer to Cisco’s Unified Computing System (UCS) and to HP’s aptly named HP Converged Infrastructure.

Hitachi’s rejoinder to Cisco and HP’s offerings is called the Unified Compute Platform (UCP). It isn’t on the market yet, but it will be released early next year. It will comprise blade servers, storage and network hardware, plus management and orchestration software. Microsoft’s System Center is in the mix, too, as are Microsoft’s Hyper-V virtualization technology and and SQL Server. VMware’s ESX hypervisors also will be supported.

One of the missing pieces is fibre-channel storage networking, but Hitachi representatives, in conversations with technology blogger Nigel Poulton, intimated that the company “might be working” on fibre channel. Then again, as Poulton cautions, that conversation involved significant language barriers, so meaning might have been lost or misconstrued in translation.

As it turns out, the Hitachi Universal Storage Platform V is a key component of the Hitachi Unified Compute Platform (UCP). In that context, it is worth noting that Hitachi already has an existing relationship with Brocade. That relationship involves Brocade providing extensive SAN-switching support for Hitachi’s Universal Storage Platform V.

I think you can see where I’m going here. I’m not the subtlest of characters. There’s a very real possibility that Brocade will be involved with Hitachi’s UCP initiative. To what extent, whether the relationship might be restricted to Brocade’s SAN gear or might also include its Foundry Ethernet switches, remains to be seen.

It’s a relationship worth watching.

IBM Reorganization Prompts Questions

IBM announced its latest quarterly results yesterday, but it did something else, too: It reorganized itself, shuffling some executives upward and changing the reporting structure for others.

On the surface, it’s not a big deal. It goes on all the time, especially at large companies besieged by changing markets, technological advances, bureaucratic inertia, and intracompany politics. Reorganizations help to shake things up, to keep the generals and the troops focused externally, on customers and markets rather than on solipsistic careerism (not that there’s anything wrong with that) and departmental intrigue.

But I’m wondering whether the IBM move portends more than that. In disclosing the changes to IBM staff in an email, the company’s president, CEO, and chairman Sam Palmisano wrote the following about the most significant aspect of the change, the integration of IBM’s formerly independent Systems and Technology Group (STG) into the company’s Software Group:

“We know that IT infrastructure performance is greatly enhanced when every element – from microprocessors and storage through operating systems and middleware – is designed and brought to market as tightly integrated, optimized systems.”

It’s a straightforward observation, as well as a decent rationale for the change, but it might hint at something more. In recombining its hardware and software under the same executive management — and in acknowledging the enhanced infrastructure performance of “tightly integrated, optimized systems” — IBM’s move causes  one to wonder whether the company might consider becoming a purveyor of other presumably valuable pieces of optimized infrastructure.

Until now, for example, IBM has been willing to stay out of the network-infrastructure business. First, it had a partnership with Cisco, which it still invokes occasionally for mutual benefit, and more recently it has partnered with Brocade and Juniper Networks. Through those partnerships, IBM covers the networking gamut, able to offer its customers extensive solutions that reach from the network edge to the core.

It doesn’t own the gear it sells, though. And it might not feel the need to offer its own gear, even now. But circumstances have changed since it first partnered with Cisco. Back then, Cisco wasn’t trying to sell servers, and it wasn’t aggressively pushing storage from EMC, an IBM “coopetitor.” Moreover, during the same intervening period, HP has gotten more serious about network infrastructure, buying 3Com to complement its HP ProCurve business and to form HP Networking.

Even Oracle is making sounds about getting into the networking game via an acquisition. That would make IBM think twice, if not three times, about whether it needed to change tack. In fact, it’s probably giving ample thought to the matter now.

I don’t presume to know what Palmisano and his inner sanctum are saying after they pad into the boardroom on IBM’s mahogany row. But I do know that this reorganization, entirely logical and justified in its own right, makes me wonder whether the stage has been set for a different sort of move.

Rumor Mongers of Summer

It’s like being in a hall of mirrors this evening. But instead of being filled with mirrors, this hall echoes with furtive whispers about potential acquisitions involving networking-industry notables.

Some of these rumors are unadulterated disinformation, propagated for one reason or another by vested interests (of which, I can assure you, I am not one).

In fact, before I continue, allow me to make full disclosure (as opposed to full monty, which is another thing entirely) and issue an important disclaimer: I have no financial interest or investment position in any of the companies or rumors I am about to discuss. If you should be foolhardy enough to trade on uncorroborated information presented in this blog post, you should seek psychiatric and financial help forthwith.

I will tolerate a lot of nonsense around here, but I will not countenance anybody blaming me for the loss of hard-earned money on the stock market. Buyer beware — and a little paranoia probably doesn’t hurt.

Okay, with those formalities out of the way, let’s get started on the sudden wave of madness that overtook the Intertubes beginning this afternoon. The rumors have been rife, coming from all manner of cranks, dealers, freaks, and schemers. One of these rumors might even prove to be true, but don’t count on it.

At this moment, one can hear chatter of Dell interest in Brocade; of IBM interest in Juniper; of a technology integration involving F5 and Juniper that might result in something more; of HP acquiring Fortinet; of Arris talking with suitors; and of Huawei, not Nokia Siemens Networks (NSN), being the company Motorola is trying to interest in its telecommunications-equipment business.

Meanwhile, a few crazies even think Cisco is kicking RIM’s tires. In my view, Microsoft — once it shakes off the cold sweats and horrific flashbacks associated with its gruesome Kin debacle — is more likely to troop to Waterloo with checkbook in hand.

It’s the middle of summer, but the industry natives are restless for hot-and-heavy investment-banker action. The investment bankers are ready to put on a show, too. The question is, will vendors pull the trigger on a deal or deals?

We can only wait, watch, and listen.

Industry Rumors Amid Summer Languor

Over at The Register, they’re having Friday fun with industry rumors.

They kick off proceedings with scuttlebutt that Brocade is a potential acquisition target for IBM, Dell, and Juniper. True, Brocade recently said it was off the market, and it rolled out a data-center strategy that suggested it was planning to remain an independent entity well into the future.

Or perhaps not. It wouldn’t be the first time a company that desperately wants to be acquired did not want to appear as though it desperately wants to be acquired. Keeping up appearances frequently entails putting on a facade.

I’m not saying that’s what Brocade is doing now, but it wouldn’t come as a shock to discover that a “for sale” notice has been discreetly and furtively distributed to certain parties. The company clearly was in play last fall. It and its agents weren’t shy about letting the world know which suitors were interested, or might be interested, in corporate matrimony.

Of those mentioned currently as prospective Brocade buyers, Juniper would seem the least likely candidate. It’s possible that Dell might be interested, but I’m not sure the folks in Round Rock are ready to pull the trigger on a networking deal at this sort of scale. IBM? I don’t know whether it wants to be directly involved in the network-infrastructure game.

The other rumor mooted by The Register involves Dell buying Commvault. The Register dismisses that one summarily, and I tend to think that ship has sailed, too.

Dell Reloads in Mid-Market Data Center

Last week, Dell announced a fusillade of products for small- and medium-sized enterprises looking to benefit from converged, virtualized data centers.

Depending on one’s vantage point, Dell proactively announced the products to offer its mid-sized enterprise customers interoperable solutions that will allow them to derive efficiencies from data-center automation;  or it made the announcement reactively, in a bid to preclude incursions into its installed base by Cisco, IBM, HP, and perhaps even Oracle, which has yet to play the data-center-hardware hand that it was dealt in its marathon acquisition of Sun Microsystems.

In receiving an update yesterday from Brian Payne, director of Dell PowerEdge servers, and Mike Roberts, senior manager of Dell PowerEdge servers, I was struck by how much emphasis the Dell spokesmen placed on two key themes: openness and innovation.

For Dell, architectural openness is defined by interoperability, adherence to industry standards, and customer freedom from proprietary lock-in. Dell draws a distinction between its interoperable approach to data-center networking and the proprietary offerings of Cisco and, increasingly, HP. Dell contends that customers that adopt  converged data-center solutions from HP or Cisco — encompassing servers, storage, networking, and virtualization — could find themselves tied to a vendor that stops innovating. For those customers, the result could be competitive disadvantage, especially if their counterparts patronize vendors  — for instance, Dell — that offer an interoperable, open model.

This leads to a discussion of innovation. Dell is at pains to stress that it has innovated and continues to innovate in the data center. Indeed, while there’s nothing revolutionary or dramatically disruptive in Dell’s new slate of product announcements, the company is making noteworthy advances in its server architectures, its storage offerings, its management software, and its support for virtualization. It’s also innovating, through its Dell Business Ready Configurations, in offering preconfigured solution bundles to mid-size enterprises in target vertical markets.

Although Dell suffers from a brand-image hangover that has proven difficult to shake,  the company has escaped from the ghetto of white-label box vendors. To be sure, Dell still has chapters to write in its data-center narrative, but it is proving adept at devising and deploying viable technical architectures and business solutions for its target markets.

In that respect, what Rob Enderle, principal analyst at the eponymous Enderle Group, told Channel Insider rings true:

“The market likes choice and specialization. No one vendor, since IBM owned this market, has been able to be expert enough at all business sizes and types providing room for each vendor to specialize and carve out a market.”

“Dell tends to favor firms who want to do much of the work themselves, aren’t particularly interested in global services, and want a hardware vendor who is at arm’s length from software to avoid lock-in. There appear to be enough of those folks to sustain Dell.”

I generally agree. Moreover, I think a case can be made that those customers, once they’ve made a significant data-center buying decision, are unlikely to switch vendors unless they’re given a compelling reason to do so. Usually, though not necessarily, that impetus would involve their incumbent vendor falling woefully behind the innovation curve over a sustained period.

Dell is cognizant of the risk, which explains why the company is pushing the innovation theme so forcefully. It wants customers to understand that its interoperable converged data center doesn’t involve an innovation tradeoff in relation to alternatives from IBM, HP, and Cisco.

Accordingly, Dell draws attention to the fact that its new blade-server hardware features the latest industry-standard microprocessors from Intel (in the PowerEdge M710HD) and AMD (in the PowerEdge R715), not to mention an interesting utilization of general-purpose GPUs in its PowerEdge M610x.

Similarly, Dell cites automated data tiering and performance improvements in its EqualLogic PS6000XVS and PS6010XVS storage arrays. It also talks up the performance advances in its PowerVault MD3200 and PowerVault MD3200i storage arrays.

On the networking side, with the release of PowerConnect-J series of products, the first offerings derived from Dell’s OEM agreement with Juniper, Dell emphasizes that its customers can rely on Dell’s networking partnerships to ensure that they don’t suffer from Cisco envy. There is a similar message in Dell’s extension of the PowerConnect B-Series of chassis-based switches OEMed from Brocade. which recently gave its own notice that it has its head and heart back in the enterprise-networking fight.

Dell also draws attention to energy-efficiency enhancements delivered in its M1000e blade-server chassis, and it notes systems-management updates to its Lifecycle Controller, Chassis Management Controller, and Integrated Dell Remote Access Controller (iDRAC). Yes, a lot of this is rustic meat and potatoes, but it’s all part of the data-center buffet, and Dell needs to demonstrate that it hasn’t forgotten to provide  a full menu.

When I spoke with Dell, I got the feeling that it fears Cisco most of all. IBM plays upmarket, mostly out of Dell’s neighborhood, and HP is a known commodity — in more ways than one — perhaps with a reputation for enterprise innovation that is no longer warranted under the grim cost-cutting scythe of Mark Hurd’s technocrats of doom.

Cisco, though, seems to command Dell’s full attention. There appears to be a belief within Dell that Cisco won’t be content to spread its Unified Computing System (UCS) for data centers exclusively to high-end enterprises and cloud-based service providers. That assumption is probably correct. Dell has reason to be concerned.

Then again, healthy paranoia never hurt anybody. If concern about Cisco keeps Dell focused on delivering solutions to its core customers in the middle market, the preoccupation will have been a positive stimulus.

As a company, though, Dell might have a better chance defending its turf if it put more resources into its SME and enterprise strategies and product portfolios and proportionally fewer resources into consumer markets, where it seems destined to lose market share and squander brand equity.

Motivations and Machinations Behind Brocade One

Well, I’m finally getting around to commenting on the Brocade One announcement earlier this week. To understand the present, however, it often is necessary to have an appreciation of the past. Brocade’s recent history was the precursor to its announcement this week, and recounting that history will help us understand what the company is trying to accomplish.

Cast your mind back to last fall. You might recall that a neon “for sale” sign had been placed in front of Brocade’s corporate logo. The company was being shopped aggressively by its investment-banker agents. Its executives appeared to have concluded that the company would be better off under the auspices of a bigger industry player than it would be as an independent vendor. Rumors abounded that somebody — HP, IBM, Oracle, Dell, even Juniper — might take the company off the market for copious riches that would keep Silicon Valley’s luxury-car dealers from having to carry lower-end models. Of course, the rumored deal never happened, and Brocade’s CEO protested that he wasn’t shopping the company.

That non-event still reverberated, primarily within Brocade’s installed base. Customers don’t like hearing their vendors are for sale. When customers buy products, they invest in relationships with vendors that sell the products. Amid all the heated hype and careless whispers about Brocade’s rumored sale, customers got nervous. Who would buy the company, and what would the new owner, when on materialized, do with Brocade’s product portfolio?

Investment bankers might have stopped talking about a Brocade acquisition, but many Brocade customers couldn’t and didn’t forget about it. They wanted to know whether Brocade had thrown in the towel, whether the company remained committed to them and dedicated to the markets it served. These were valid questions, and just having field sales representatives provide stock answers wasn’t enough.

In the period preceding the acquisition chatter, Brocade was struggling to integrate its own $3-billion acquisition of Foundry Networks, an Ethernet-switch vendor that, like so many before it, tilted quixotically at Cisco’s enterprise windmill. Brocade, which made its name in storage networking, didn’t seem to know what to do with Foundry, whose morale and sales suffered in the deal’s aftermath. Pulling the companies together under a shared vision and unified product strategy proved exceedingly difficult for Brocade’s executives.

When it became clear that Brocade wasn’t about to find a buyer, that it had to solve the Foundry problem on its own, the company changed gears. It brought aboard some seasoned executive talent, including John McHugh, who had extensive experience battling Cisco in Ethernet switching, and it sought to craft a new narrative stressing reinvention and a bright future.

So, that’s the context for the announcement that took place earlier this week. Brocade’s challenges were threefold: calm a nervous customer base concerned about the company’s direction and future viability; demonstrate that it had righted the foundering Foundry ship; show some thought leadership on the future of data-center networking, with due consideration given to rampant virtualization and increasing adoption of cloud computing.

In announcing Brocade One, the company addressed all those issues. Brocade showed it had the necessary chops for vision and strategy, it illustrated that it finally had harnessed and integrated the Foundry portfolio into a cohesive solution set (at least on paper), and it demonstrated to customers that it was ready to provide new collapsed network fabrics for evolving data centers.

Well played, Brocade, well played. You turned an existential corporate crisis into an opportunity for triumphant reinvention. The company deserves credit for recognizing its dilemma and climbing out of the hole it had dug for itself.

Not surprisingly, Brocade is taking a partnering approach to providing solutions for the next-generation data center. In this case, though, necessity is the mother of invention. Unlike Cisco, but like Juniper, Brocade has chosen the partnering path because it’s the only one available to it. That doesn’t mean that path isn’t the right one, or that it won’t lead to a pot of gold, but Brocade didn’t have much choice in the matter. Against Cisco or HP, it wouldn’t win in a competition based on resources and vertical scale.

All the big networking players are emphasizing virtualization, cloud computing, and convergence. Brocade is no exception. Theoretically, they’re all in agreement about the need to abstract (hide) complexity from customers through automation, and they’re all seemingly committed to simplifying and flattening network architectures. All networking vendors are saying today’s networks won’t adequately support increasing virtualization, but some beat the drum more fervently than others. Obviously, Cisco — as the enterprise networking behemoth — has more to lose than its competitors from a jarring or sudden market transition away from the status quo.

Clearly that transition presents a once-in-a-lifetime opportunity for Cisco’s competitors. An awareness of that opportunity was implicit in much of the message Brocade delivered this week.

Meanwhile, Cisco, Juniper, and Brocade are taking different architectural approaches to redesigning the data-center networks, whereas HP, for now, seems content to position itself as the vendor who will commoditize the hell out of them. Cisco is pushing its Nexus switches, its Unified Computing Systems (UCS), VMWare virtualization technologies, and EMC storage. HP is coming at the market with a similar one-stop-shopping approach, though it will play the field on virtualization, pushing a cheap-and-cheerful approach to low-priced, standards-based networking gear. For HP, at least at this point, networking is where it will pound away at Cisco’s margins rather than where it will innovative its way to market leadership.

Juniper, as we know, has laid out its 3-2-1 strategy, on the road to Stratus. It’s a partner-intensive formula, with IBM and Dell critical to the company’s success.  Juniper has spent a lot of time formulating a JUNOS strategy that looks relatively well baked. The more substantive value it can deliver to its customers and partners through JUNOS, the more likely Juniper will prosper. It’s a good plan, albeit one that remains, like much of the next-generation networking architectures, a work in progress.

An interesting sidebar will be HP’s partnership with Brocade. Now that it owns 3Com, HP has Ethernet switches that span the enterprise gamut. Those will compete against Brocade’s Foundry portfolio, even though HP still carries Brocade’s storage-networking products.

Some observers believe Brocade remains for sale, and that the company chose to pursue a strategic makeover for the sake of appearance, to make it look both more attractive and more threatening to potential acquirers. If that’s  true, HP remains a company whose attention Brocade would want to draw. Oracle has yet to play its networking cards, too, and Dell is at a crossroads, unsure of whether to follow the path of HP or of IBM.

In any good story, the reader can’t wait to see what happens next. As data-center networking gets redefined by pervasive virtualization and cloud computing, we’ll all be closely monitoring events.

For the first time in years, and to a far greater extent than in recent history, customers will hold nearly all the cards in enterprise networking. Incumbency has its privileges, obviously, but it’s no guarantee of indefinite rule. Change is coming, vendors are staking positions and making claims, but customers ultimately will decide which vendors will lead them into a brave new world.