Report: HBA Market Stalls

Host bus adapter (HBA) archrivals Emulex Corp. (NYSE: ELX) and QLogic Corp. (Nasdaq: QLGC) both reported strong quarterly revenue growth last month, but a new Gartner Inc. study casts doubts over whether the growth can continue in a market that last year all but ground to a halt (see QLogic Rolls in Dough and Is Emulex Slowing Down?).

The study, which covers SAN component market share for 2002, reveals that the Fibre Channel HBA market grew by only 1 percent last year, to $570 million -- far below many analysts' expectations. Thomas Weisel Partners analyst Jason Ader claims he held one of the more bearish estimates of HBA market growth last year, and he was forecasting growth of around 6 percent.

"I think this would be a shock to most people who think the space is fast-growing, given ELX's and QLGC's recent growth rates," he writes in an email. "In fact, those guys have just been taking share."

The two HBA vendors have certainly been gaining market share in the space. Over the past week, both Emulex and QLogic highlighted portions of the Gartner report that showed them in the most favorable light. Emulex announced that it had strengthened its position as market leader by 8 percent during 2002, accounting for 48 percent of overall HBA market revenue (see Emulex Tops FC HBA market). Meanwhile, QLogic touted that it had increased its HBA market share by about 10 percent, jumping to a 31.7 percent (see QLogic Gains HBA Market Share).

Gartner has yet to publicly release the market share numbers from its report, but report author James Opfer confirms that the numbers in the Emulex and QLogic press releases are accurate. "2002 was not a good year," he says. "Considering the economic circumstances, any growth is excellent."