Cisco buys fiber channel SAN maker

Networking equipment maker Cisco Systems Inc. will buy Andiamo Systems Inc., a manufacturer of storage switching products for the Storage Area Networking (SAN) market, in an all-stock deal, the companies announced Tuesday.

Cisco already owns part of Andiamo, a privately held company headquartered in San Jose, California, and is exercising its right to obtain the remainder of the company for up to US$2.5 billion, the companies said in a statement.

The final purchase price will be determined shortly before the deal closes, which is expected to be sometime between February and April 2004, during Cisco's third fiscal quarter, but no later than July 31, 2004, Cisco and Andiamo said.

The closing price will be determined by a number of factors, including sales of Andiamo products in a three-month period shortly before closing, along with Cisco's sales and market capitalization, the companies said.

"The timing is contractual and was part of the original agreement between Cisco and Andiamo. It is based on a timeline around shipping the products and when the products gain a level of acceptance within the marketplace," said Ammar Hanafi, vice president of strategy and business development for Cisco in a telephone conference call.

Andiamo produces storage switches that use intelligence about stored application data to grant prioritized access to that data. As part of its deal with Andiamo, Cisco announced on Tuesday that the range of multilayer intelligent storage switches developed by Andiamo will be sold under the brand name "Cisco MDS 9000," and will be available between October and December, the companies said.

Pricing for the Cisco MDS 9000 line of storage switches will begin at $30,000 and they will be sold through partners, said Cisco's chief development officer, Mario Mazzola in the conference call. "Cisco will follow its existing sales model. We will leverage pragmatically strong partnerships," Mazzola said.

Andiamo was founded in January of last year and employs about 270 people, the companies said.

Cisco, also headquartered in San Jose, has been moving to increase its presence in the SAN market over the past year through investments in startup companies such as Andiamo and the storage-virtualization vendor StoreAge Networking Technologies Ltd. Cisco has also been releasing its own storage products, including the SN 5420 storage router for transporting data over IP (Internet Protocol) using the iSCSI (Internet Small Computer System Interface) protocol, and a storage switch that supports Fibre Channel, SCSI and Gigabit Ethernet. Cisco, which will be competing against Brocade Communications Systems Inc. and McData Corp., is aiming its MDS 9000 line of storage switches at the financial services markets, pharmaceutical companies and manufacturing companies, Mazzola said.

"We believe we are providing basic characteristics of SAN switches that our competitors are already providing but that we will also have the ability to extend the acceleration of the technology," Mazzola said.

The Cisco MDS switches, which feature 16 to 768 ports in comparison to the 8 to 128 port range held by competing switches, are currently being tested with a "number of partners" with beta testing expected to begin by the end of August or the beginning of September, Mazzola said, though he declined to name any of the partners.

Within Cisco, the Andiamo products are in the alpha test stage and "feedback has so far been very good," Mazzola said.

"Andiamo provides early integration and also extends the ability of SAN across multistructure applications. The products that are coming out by the end of this year can plug into existing or competitive environments and we will be competitive in all basic functions," Mazzola said.

According to Mazzola, Cisco does not plan to resell storage as part of its business plan.

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