Earlier this year, several industry observers, including us, wondered whether McData even had a strategy in place to counter Brocade's Rhapsody Networks acquisition and Cisco's application services blade, which it's still developing with Veritas Software Corp. (Nasdaq: VRTS).
Turns out the Colorado crew was just holding out until it felt it had the right pieces in place. For now, it appears to be trailing Brocade and Cisco in terms of R&D but given that EMC Corp. (NYSE: EMC) executive VP of software Mark Lewis doesn't believe this market will materialize until 2005 at the soonest, it's not at all late to the party.
Meanwhile, while Nishan and Sanera employees won't get a huge dotcom-style windfall, the deals save both startups from potentially gruesome fates as SAN roadkill. Nishan had been running low on funding, as was Sanera before getting a $35 million infusion just last month.
These two were facing that familiar startup challenge of trying to sell expensive point products that would become key parts of an enterprise's most critical IT infrastructure, and trying to do it with relatively tiny sales forces and with limited access to distribution channels. That's always a tough proposition for a small company, no matter how good the technology, and even more so in a tepid spending environment. Nishan was ahead of Sanera on this front, having already shipped 500 switches into the field. But a run rate of $3 million to $5 million per quarter for a 100-person company, which is what Nishan estimates it has been generating, wasn't quite going to keep it aloft.
A few weeks ago, we dropped Nishan from the Byte and Switch Top 10 Private Companies list (see Top Ten Private Companies: Summer 2003). But in light of McData's acquisition of Nishan, even though the purchase price was "below preference," I'd say we blew that call. (On the bright side, we don't have to update the Top 10 list right away.)
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