Category Archives: Storage

HP’s Project Voyager Alights on Server Value

Hewlett-Packard earlier this week announced the HP ProLiant Generation 8 (Gen8) line of servers, based on the HP ProActive Insight architecture. The technology behind the architecture and the servers results from Project Voyager, a two-year initiative to redefine data-center economics by automating every aspect of the server lifecycle.

You can read the HP press release on the announcement, which covers all the basics, and you also can peruse coverage at a number of different media outposts online.

Voyager Follows Moonshot and Odyssey

The Project Voyager-related announcement follows Project Moonshot and Project Odyssey announcements last fall. Moonshot, you might recall, related to low-energy computing infrastructure for web-scale deployments, whereas Odyssey was all about unifying mission-critical computing — encompassing Unix and x86-based Windows and Linux servers — in one system.

A $300-million, two-year program that yielded more than 900 patents, Project Voyager’s fruits, as represented by the ProActive Insight architecture, will span the entire HP Converged Infrastructure.

Intelligence and automation are the buzzwords behind HP’s latest server push. By enabling servers to “virtually take care of themselves,” HP is looking to reduce data-center complexity and cost, while increasing system uptime and boosting compute-related innovation. In support of the announcement, HP culled assorted facts and figures to assert that savings from the new servers can be significant across various enterprise deployment scenarios.

Taking Care of Business

In taking care of its customers, of course, HP is taking care of itself. HP says it tested the ProLiant servers in more than 100 real-world data centers, and that they include more than 150 client-inspired design innovations. That process was smart, and so were the results, which not only speak to real needs of customers, but also address areas that are beyond the purview of Intel (or AMD).

The HP launch eschewed emphasis on system boards, processors, and “feeds and speeds.” While some observers wondered whether that decision was taken because Intel had yet to launch its latest Xeon chips, the truth is that HP is wise to redirect the value focus away from chip performance and toward overall system and data-center capabilities.

Quest for Sustainable Value, Advantage 

Processor performance, including speeds and feeds, is the value-added purview of Intel, not of HP. All system vendors ultimately get the same chips from Intel (or AMD). They really can’t differentiate on the processor, because the processor isn’t theirs. Any gains they get from being first to market with a new Intel processor architecture will be evanescent.

They can, however, differentiate more sustainably around and above the processor, which is what HP has done here. Certainly, a lot of value-laden differentiation has been created, as the 900 patent filings attest. In areas such as management, conservation, and automation, HP has found opportunity not only to innovate, but also to make a compelling argument that its servers bring unique benefits into customer data centers.

With margin pressure unlikely to abate in server hardware, HP needed to make the sort of commitment and substantial investment that Project Voyager represented.

Questions About Competition, Patents

From a competitive standpoint, however, two questions arise. First, how easy (or hard) will it be for HP’s system rivals to counter what HP has done, thereby mitigating HP’s edge? Second, what sort of strategy, if any, does HP have in store for its Voyager-related patent portfolio? Come to think of it, those questions — and the answers to them — might be related.

As a final aside, the gentle folks at The Register inform us that HP’s new series of servers is called the ProLiant Gen8 rather than ProLiant G8 — the immediately predecessors are called ProLiant G7 (for Generation 7) — because the sound “gee-ate” is uncomfortably similar to a slang term for “penis” in Mandarin.

Presuming that to be true, one can understand why HP made the change.

Brocade Engages Qatalyst Again, Hopes for Different Result

The networking industry’s version of Groundhog Day resurfaced late last week when the Wall Street Journal published an article in which “people familiar with the matter” indicated that Brocade Communications Systems was up for sale — again.

Just like last time, investment-banking firm Qatalyst Partners, headed by the indefatigable Frank Quattrone, appears to have been retained as Brocade’s agent. Quattrone and company failed to find a buyer for Brocade last time, and many suspect the same fate will befall the principals this time around.

Changed Circumstances

A few things, however, are different from the last time Brocade was put on the block and Qatalyst beat Silicon Valley’s bushes seeking prospective buyers. For one thing, Brocade is worth less now than it was back then. The company’s shares are worth roughly half as much as they were worth during fevered speculation about its possible acquisition back in the early fall of 2009. With a current market capitalization of about $2.15 billion, Brocade would be easier for a buyer to digest these days.

That said, the business case for Brocade acquisition doesn’t seem as compelling now as it was then. The core of its commercial existence, still its Fibre Channel product portfolio, is well on its way to becoming a slow-growth legacy business. What’s worse, it has not become a major player in Ethernet switching subsequent to its $3 billion purchase of Foundry Networks in 2008. Running the numbers, prospective buyers would be disinclined to pay much of a premium for Brocade today unless they held considerable faith in the company’s cloud-networking vision and strategy, which isn’t at all bad but isn’t assured to succeed.

Unfortunately, another change is that fewer prospective buyers would seem to be in the market for Brocade these days. Back in 2009, Dell, HP, Oracle, IBM all were mentioned as possible acquirers of the company. One would be hard pressed to devise a plausible argument for any of those vendors to make a play for Brocade now.

Dell is busily and happily assimilating and integrating Force10 Networks; HP is still trying to get its networking house in order and doesn’t need the headaches and overlaps an acquisition of Brocade would entail; IBM is content to stand pat for now with its BLADE Network Technologies acquisition; and, as for Oracle, Larry Ellison was adamant that he wanted no part of Brocade. Admittedly, Ellison is known for his shrewdness and occasional reverses, but he sured seemed convincing regarding Oracle’s position on Brocade.

Sorting Out the Remaining Candidates

So, that leaves, well, who exactly? Some believe Cisco might buy up Brocade as a consolidation play, but that seems only a remote possibility. Others see Juniper Networks similarly making a consolidation play for Brocade. It could happen, I suppose, but I don’t think Juniper needs a distraction of that scale just as it is reaching several strategic crossroads (delivery of product roadmap, changing industry dynamics, technological shifts in its telco and service-provider markets). No, that just wouldn’t seem a prudent move, with the risks significantly outweighing the potential rewards.

Some say that private-equity players, some still flush with copious cash in their coffers, might buy Brocade. They have the means and the opportunity, but is the motive sufficient? It all comes back to believing that Brocade is on a strategic path that will make it more valuable in the future than it is today. In that regard, the company’s recent past performance, from a valuation standpoint, is not encouraging.

A far-out possibility, one that I would classify as remotely unlikely, envisions EMC buying Brocade. That would signal an abrupt end to the Cisco-EMC partnership, and I don’t see a divorce, were it to transpire, occurring quite so suddenly or irrevocably.

I do, however, see one dark-horse vendor that could make a play for Brocade, and might already have done so.

Could it Be . . . Hitachi?

That vendor? It’s Hitachi Data Systems. Yes, you’re probably wondering whether I’ve partaken of some pre-Halloween magic mushrooms, but I’ve made at least a half-way credible case for a Hitachi acquisition of Brocade previously. With its well-hidden Unified Compute Platform (UCP), Hitachi has aspirations to compete against Cisco, HP, Dell and others in converged data-center infrastructure. Hitachi owns 60 percent of a networking joint venture, with NEC as the junior partner, called Alaxala. If you go to the Alaxala website, you’ll see the joint venture’s current networking portfolio, which is bereft of Fibre Channel switches.

The question is, does Hitachi want them? Today, as indicated on the Hitachi website, the company partners with Brocade, Cisco, Emulex (adapters), and QLogic (adapters) for Fibre Channel networking and with Brocade and QLogic (adapters) for iSCSI networking.

The last time Brocade was said to the market, the anticlimactic outcome left figurative egg on the faces of Brocade directors and on those of the investment bankers at Qatalyst, which has achieved a relatively good batting average as a sales agent. Let’s assume — and, believe me, it’s a safe assumption — that media leaks about potential acquisitions typically are carefully contrived occurrences, done either to make a market or to expand a market in which there’s a single bidder that has declared intent and made an offer. In the latter case, the leak is made to solicit a competitive bid and drive up value.

Hold the Egg this Time

I’m not sure what transpired the first time Qatalyst was contracted to find a buyer for Brocade. The only sure inference is that the result (or lack thereof) was not part of the plan. Giving both parties the benefit of the doubt, one would think lessons were learned and they would not want to perform a reprise of the previous script. So, while perhaps last time there wasn’t a bidder or the bidder withdrew its offer after the media leak was made, I think there’s a prospective buyer firmly at the table this time. I also think Brocade wants to see whether a better offer can be had.

My educated guess, with the usual riders and qualifications in effect,* is that perhaps Hitachi or a private-equity concern (Silver Lake, maybe) is at the table. With the leak, Brocade and Qatalyst are playing for time and leverage.

We’ll see, perhaps sooner rather than later.

* I could, alas, be wrong.

Further Intimations of Cisco-EMC Tensions

At the risk of further ad-hominem attacks, I will note again that all might not be well with the relationship between Cisco and EMC, particularly within the context of their VCE joint venture.

I suggested previously that Cisco and EMC might be heading for a not-so-amicable divorce, and I still feel that the organizational and technological auguries point in that direction. The signs at VCE — which provides converged infrastructure comprising Cisco servers and switches, EMC storage, and VMware virtualization — have been inauspicious lately, with layoffs, significant restructuring, and Cisco’s increasingly ardent converged-infrastructure partnership with EMC competitor NetApp adding murk to the mix.

Capellas Loses CEO Title

Now, there’s more to consider. A few weeks ago, as reported by The Register, Michael Capellas was delisted as VCE’s CEO on the company’s website. Capellas is a Cisco board member who was strongly backed by John Chambers for the CEO position at VCE.  The official story from VCE is that nothing has changed at VCE, that Capellas’ role remains the same even though he’s lost the CEO designation and now shares the responsibility of running the company with Frank Hauck, a longtime EMC executive who was appointed VCE president earlier this year.

Perhaps VCE’s official spin on the mahogany-row shuffle is true, but skepticism seems warranted.

In the same piece at The Register that updates us on Capellas’ current status at VCE, we also learn that a source formerly employed by the joint venture says “the Cisco originator of the Vblock concept  is no longer at VCE and neither is the Cisco staffer who ran VCE’s service provider and channel sales operation.”

Mere coincidence, one might contend, and I’m inclined to take that possibility under advisement.

EMC in Server Business?

There’s one other piece of evidence to consider, though. As reported by The Register (yes, again), EMC seems to have moved, via its storage arrays, into the server business. That, as you might expect, could have implications for EMC’s relationship with Cisco and its Unified Computing System (UCS) servers.

Here’s a particularly salient excerpt from The Register article, written by Chris Mellor:

“If you have a VMAX, with flash-enhanced engines, able to run application software, then you wouldn’t need UCS servers to do that job. Were EMC to do a deal with a network supplier, then you wouldn’t need Cisco network switches to hook the application server/array complex up to accessing clients either, and we might have a VMAXblock as well as a Vblock.”

For its part, EMC is ambiguous on whether it’s actually entering the server space. On his blog, EMC staffer Mark Twomey has enjoyed some mischievous fun with the proposition, concluding that EMC’s moves put in the compute and systems business and “maybe” in the server business.

Such fine distinctions might be lost on server vendors such as HP, Dell, and IBM.

Follow the Money

Let’s remember that EMC is the overwhelming majority shareholder — and, thus, owner — of VMware. As such, the virtualization leader will not do anything to hurt the business prospects of its de facto parent. More to the point, VMware remains in the strategic service of EMC, furthering its big-picture agenda while advancing its own interests.

That combination isn’t just a competitive threat to the likes of HP, IBM, and Dell. Increasingly — indirectly or otherwise — Cisco seems to be in EMC-VMware gunsights, too.

ONF Board Members Call OpenFlow Tune

The concept of software-defined networking (SDN) has generated considerable interest during the last several months.  Although SDNs can be realized in more than one way, the OpenFlow protocol seems to have drawn a critical mass of prospective customers (mainly cloud-service providers with vast data centers) and solicitous vendors.

If you aren’t up to speed with the basics of software-defined networking and OpenFlow, I suggest you visit the Open Networking Foundation (ONF) and OpenFlow websites to familiarize yourself the underlying ideas.  Others have written some excellent articles on the technology, its perceived value, and its potential implications.

In a recent piece he wrote originally for GigaOm, Kyle Forster of Big Switch Networks offers this concise definition:

Concisely Defined

“At its most basic level, OpenFlow is a protocol for server software (a “controller”) to send instructions to OpenFlow-enabled switches, where these instructions give direct control over how those switches forward traffic through the network.

I think of OpenFlow like an x86 instruction set for the network – it’s low-level, but it’s very powerful. Continuing that analogy, if you read the x86 instruction set for the first time, you might walk away thinking it could be useful if you need to build a fancy calculator, but using it to build Linux, Apache, Microsoft Word or World of Warcraft wouldn’t exactly be obvious. Ditto for OpenFlow. It isn’t the protocol that is interesting by itself, but rather all of the layers of software that are starting to emerge on top of it, similar to the emergence of operating systems, development environments, middleware and applications on top of x86.”

Increased Network Functionality, Lower Network Operating Costs

The Open Networking Foundation’s charter summarizes its objectives and the value proposition that advocates of SDN and OpenFlow believe they can deliver:

 “The Open Networking Foundation is a nonprofit organization dedicated to promoting a new approach to networking called Software-Defined Networking (SDN). SDN allows owners and operators of networks to control and manage their networks to best serve their users’ needs. ONF’s first priority is to develop and use the OpenFlow protocol. Through simplified hardware and network management, OpenFlow seeks to increase network functionality while lowering the cost associated with operating networks.”

That last part is the key to understanding the composition of ONF’s board of directors, which includes Deutsche Telecom, Facebook, Google, Microsoft, Verizon, and Yahoo. All of these companies are major cloud-service providers with multiple, sizable data centers. (Yes, Microsoft also is a cloud-technology purveyor, but what it has in common with the other board members is its status as a cloud-service provider that owns and runs data centers.)

Underneath the board of directors are member companies. Most of these are vendors seeking to serve the needs of the ONF board members and similar cloud-service providers that share their business objective: boosting network functionality while reducing the costs associated with network operations.

Who’s Who of Networking

Among the vendor members are a veritable who’s who of the networking industry: Cisco, HP, Juniper, Brocade, Dell/Force10, IBM, Huawei, Nokia Siemens Networks, Riverbed, Extreme, and others. Also members, not surprisingly, are virtualization vendors such as VMware and Citrix, as well as the aforementioned Microsoft. There’s a smattering of SDN/OpenFlow startups, too, such as Big Switch Networks and Nicira Networks.

Of course, membership does not necessarily entail avid participation. Some vendors, including Cisco, likley would not be thrilled at any near-term prospect of OpenFlow’s widespread market adoption. Cisco would be pleased to see the networking status quo persist for as long as possible, and its involvement in ONF probably is more that of vigilant observer than of fervent proponent. In fact, many vendors are taking a wait-and-see approach to OpenFlow. Some members, including Force10, are bearish and have suggested that the protocol is a long way from delivering the maturity and scalability that would satisfy enterprise customers.

Vendors Not In Charge

Still, the board members are steering the ONF ship, not the vendors. Regardless of when OpenFlow or something like it comes of age, the rise of software-defined networking seems inevitable. Servers and storage gear have been virtualized and have become more application-driven, but networks haven’t changed much in the last several years. They’re faster, yes, but they’re still provisioned in the traditional manner, configured rather than programmed. That takes time, consumes resources, and costs money.

Major cloud-service providers, such as those on the ONF board, want network infrastructure to become more elastic, flexible, and dynamic. Vendors will have to respond accordingly, whether with OpenFlow or with some other approach that delivers similar operational outcomes and business benefits.

I’ll be following these developments closely, watching to see how the business concerns of the cloud providers and the business interests of the networking-vendor community ultimately reconcile.

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.

Cisco to Cut Staff; EMC Speculation Vanishes

Gleacher & Co. analyst Brian Marshall drew some notice earlier today when he wrote that Cisco could slash as many as 5,000 positions, about seven percent of its workforce, next month. Marshall estimated that the cull “could incrementally reduce Cisco’s pro forma operating expenses by about $1 billion annually.”

Cisco Confirms Cuts

Marshall said the estimates were his own, based on what he believed Cisco needs to do to meet its meet its $1-billion objective for reduced annual expenses. Cisco later confirmed that job cuts are coming in August, though it did not indicate how many employees would be affected. Previously, Cisco had been encouraging employees to take early-retirement packages.

At the same time he made his projections about how many workers Cisco might need to jettison, Marshall also speculated that Cisco should seek a “transformative merger” with EMC. On that theme, Marshall apparently opined that a combination with EMC would give Cisco “better exposure to enterprise storage trends, ownership of the VMware asset for virtualization, a more robust security offering and a better collection of IT service professionals.”

I included the qualifier “apparently” in the preceding sentence because it seems Bloomberg and BusinessWeek, which both earlier today published a report including references to Marshall’s musings regarding a Cisco takeout of EMC, have excised any mention of EMC from subsequent iterations of the coverage.

Marshall’s M&A Advice Disappears

It’s hard to tell what that means, if anything. All I know is that the earliest version of the story included reference to Marshall’s advice that Cisco buy EMC, and later iterations of the story made no mention of EMC. It’s odd, but strange things happen when news is published in realtime.

Presuming I did not hallucinate — and a report by Jim Duffy over at NetworkWorld suggests I did not — what are we to make of Marshall’s recommendation? Well, it wouldn’t the first time somebody has suggested that Cisco acquire EMC, and it probably won’t be the last. The conjecture or rumor (or whatever else you want to call it) has had more comebacks than Brett Favre. It’s an old chestnut that gets repeated plays on analysts’ virtual jukeboxes.

Given its current valuation, though, EMC probably isn’t going anywhere. At the conclusion of stock-market trading today, EMC had a market capitalization of more than $56.1 billion, whereas Cisco had a market capitalization of $84.8 billion. Cisco has made a few sizable acquisitions in its time — though it established its wheeler-dealer bones on smaller, bite-size technology buys — but it never has done a deal on the gargantuan scale that would be required to land EMC.

Cisco’s Repatriation Holiday

What’s more, Cisco still has most of its cash overseas, It’s lobbying the U.S. government assiduously for a repatriation tax holiday, but that break hans’t been accorded yet. Even if Cisco were desperate enough to abandon its old acquisition playbook and splash out obscene amounts of cash and stock for EMC — and, for the record, I think Cisco is teetering on the cusp of becoming seriously desperate — it is not in a position to make the move until its overseas cash hoard (of approximately $31.6 billion) has been repatriated.

Even then, does EMC want to sell? Like every other vendor out there, EMC faces daunting challenges as the ascent of cloud computing realigns the data-center landscape. Still, one could make a compelling case that EMC, with its storage leadership and its 80-percent-plus ownership of VMware, is better placed than most vendors, including Cisco, to survive and even thrive in that brave new world. Does it really want to take Cisco stock — any deal would have to involve Cisco shares as well as cash — as part of a potential transaction? I don’t see it happening.

Dividing the Spoils

Cisco might have concerns regarding its share of the spoils from its Virtual Computing Environment (VCE) joint venture with EMC, which perhaps partly explains why it has partnered increasingly aggressively with NetApp on the FlexPod converged infrastructure architecture. Nonetheless, Cisco isn’t in a position to buy EMC, and EMC isn’t willing to part with its majority-owned VMware, so even a more modest deal is off the table.

Could Cisco buy NetApp? It could, but such a move would entail a different set of consequences, risks, and rewards, all of which we will save for another post.

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.