Converged Network Adapters: The Race Is On

On November 11, Emulex (ELX) and QLogic (QLGC) issued press releases announcing their respective Fibre Channel HBA market share gains in Q3CY09. Emulex highlighted a 4% gain in the standalone 8Gb HBA segment while QLogic emphasized their strength in blade server mezzanine cards that led to a overall 1.9% gain in market share.

As the two giants in the Fibre Channel HBA market slug it out for a percentage or two each quarter, the entrants in the new market for CNAs are out of the blocks, and the race is on, and the pace is fast.

New Products Appearing

During calendar 2009, Brocade (BRCD), Emulex and QLogic announced a variety of design wins with Dell (DELL), IBM (IBM)and HP (HPQ) for CNAs in PCI-E form-factors or CNAs in blade server mezzanine card form-factors. Also announced during this year were the virtualization-optimized Palo CNA from Cisco (CSCO) and ConnectX EN from Mellanox (MLNX). Each of the products includes support for Data Center Ethernet (DCE), the foundation of all CNAs.

Volume and Revenue Ramping

According to the Q3CY09 CNA Market Share Report, manufacturer CNA port volume increased 133% quarter-over-quarter to a total of 9,800 ports and revenue increased 148% quarter-over-quarter to $4.0 million.

Leaders Emerging

The rapid growth of CNA volume and revenue was led by Emulex with 163% quarter-over-quarter growth to $2.5 million and 170% quarter-over-quarter growth to 7,300 ports shipped. This growth positioned Emulex at the end of Q3CY09 with 2.1x the revenue and 3.6 x the ports of their nearest competitor QLogic.

Q4CY09 and Beyond

Through Q3CY09 CNA volume was driven by Emulex and QLogic partnerships with Cisco. During Q4CY09 and Q1CY10, the assault on the legacy markets for Fibre Channel HBAs and Ethernet NICs will begin in earnest as activities at Dell, HP and IBM transition from CNA technical and sales training, to CNA deployments.

The Strategies

Emulex enters CY10 with a product rich in NIC functionality and partnerships with OEMs to satisfy 10Gb NIC demand with Emulex CNAs. Support for iSCSI and FCoE offload will be available in pay-as-you go upgrades during Q4CY09 or Q1CY10.

QLogic enters CY10 with a product rich in FCoE functionality and partnerships with OEMs to satisfy Fibre Channel HBA demand with QLogic CNAs. More robust NIC capabilities will emerge during CY10.

NIC giants Broadcom (BRCM) and Intel (INTC) will enter the CNA market in the first half of CY10. We could see could a quantum increase in CNA industry volume very quickly if Broadcom and Intel position their 10Gb CNAs to displace some or all of the 10Gb NICs they have been shipping for years and that are now ramping at over 50% per quarter.

Conclusions

1. Emulex is clearly out of the blocks first in the CNA race.
2. During CY10, CNA deployments will align with the past. CNAs with solid NIC functionality will deploy in NIC applications, CNAs with great storage functionality will deploy in SAN applications and CNAs with low-latency will deploy in HPC clusters.
3. Based on the fact the data center NIC market is four times bigger than the Fibre Channel HBA market, I like the NIC market focus of Broadcom, Emulex and Intel.

Disclosure: No positions.

Comments

[navkram1:]

I beg to differ with your reasoning. A NIC that does not do storage is a NIC. To do storage right you need the software compatibility with legacy high performance storage. Emulex will lead early (they have more of the high end market) QLGC will overtake them before the volume comes on (they already lead in price and performance), and BRCM and INTC will continue to dominate the NIC market that isn't really compatible with FC SANS.

Dec 03 11:38 AM