On April 8, Emulex (ELX) announced that its OneConnect Universal Converged Network Adapters for 10 gigabit iSCSI and Fibre Channel over Ethernet are now available through EMC Select for use across the Connectrix, CLARiiON, Celerra and Symmetrix product lines. What stood out to me was this marks the first 10 gigabit iSCSI connectivity solution available from storage giant EMC. Emulex hit three birds with one stone by tapping into the fast growing markets for iSCSI storage and 10 gigabit Ethernet, and by seizing an exclusive position with EMC...at least until EMC qualifies a competitor.
Tapping into iSCSI Growth
The growth of iSCSI storage and networking is a blinding-bright spot in the overall market for storage. For example, in their last quarter's earnings announcement, Dell (DELL) reported 44% year-over-year growth for iSCSI storage alongside a slight decline in overall storage revenue. Thursday, Cannacord Adams published a Daily Letter (.pdf) that expressed, "a cautious tone across the storage sector as checks across the high-end server and storage food chain detected a more sober tone vs. September and December." Inside of this sector, I expect iSCSI storage and networking sales to continue double digit quarter over quarter growth. Considering that over 1 million server ports will be configured for iSCSI in 2010, there is plenty of short term potential for Emulex to drive incremental revenue with their iSCSI adapters. Long term, I expect revenue from iSCSI storage to exceed revenue from Fibre Channel storage within five years.
Tapping into 10 Gigabit Ethernet Growth
One of the few infrastructure segments growing faster than iSCSI storage is 10 gigabit Ethernet networking. Together they form 10 gigabit iSCSI storage area networks (SANs). In 2010, shipments of 10 gigabit Ethernet ports will more than double. And within the next two years, 10 gigabit Ethernet ports on data center servers will replace 1 gigabit Ethernet ports as the standard as network administrators install faster networks to match the 10x better I/O performance of their new servers with Intel Xeon processors.
An Exclusive Position with EMC
EMC storage systems offer connectivity to a server via modules with both 8 gigabit Fibre Channel and 10 gigabit iSCSI ports (.pdf). EMC does not report the percentage of iSCSI storage ports vs. the percentage of Fibre Channel ports configured by their customers. If that percentage is a conservative 10% and we multiply that times EMC's 30% share of the external storage market, then Emulex is the only 10 gigabit adapter vendor competing to connect servers to EMC 1/10 gigabit iSCSI storage that comprises 3% of the storage market...at least until EMC qualifies another 10 gigabit vendor.
The Bottom Line
The bottom line is that iSCSI is a critically important growth market for storage and networking vendors. The announcement by Emulex indicates they're getting in on the ground floor which should translate long term into greater market share and profitability.
Disclosure: No positions