Nemertes Impact Analysis:

Dell (NASDAQ:DELL) plans to capitalize on enterprise movement toward a unified Ethernet data center fabric, in the short term by adding 10G Ethernet connectivity to its iSCSI storage, in the longer term by adding Fibre Channel over Ethernet (FCoE) networking via OEM switch and adapter deals with Brocade (NASDAQ:BRCD) and QLogic (NASDAQ:QLGC) respectively. Already 17.3% of data centers have converged onto Ethernet, almost exclusively using iSCSI block storage access; about 40% will have by 2012. Although only 2.5% currently use FCoE (5.5% planning to by 2011), FCoE support will be a check-box requirement for many data center infrastructure refreshes.

Impacts

Enterprises: When adding block-storage infrastructure, evaluate Ethernet, iSCSI and FCoE before adding FC plant.

Vendors: Storage and network vendors, 10G, iSCSI, and eventually FCoE are the future of the data center fabric; prospects will expect to know your migration plans.

Investors: More support for 10G will mean more business for Cisco (NASDAQ:CSCO), Juniper (NASDAQ:JNPR), HP (NYSE:HPQ)--especially in the wake of the 3COM (NASDAQ:COMS) acquisition--Brocade, Extreme (NASDAQ:EXTR) and privately held Force10. Ditto FCoE's slow rise and converged network adapter makers Emulex (NYSE:ELX) and Qlogic (NASDAQ:QLGC).

By John E. Burke, Principal Research Analyst

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