This week, Brocade held its annual investor conference in New York City. New York is the obvious choice for investor events as it is filled with banks, hedge funds, mutual funds, and other financial firms. New York is also home to Yankees shortstop Derek Jeter, who I feel is one of the most overrated players in baseball history.
However, I’ve felt for a while that Brocade is one of the most underrated network vendors in the industry today – the anti-Jeter of networking. At the event, CEO Lloyd Carney and the rest of the executives did a nice job of highlighting the opportunities for the company moving forward. While the company does have its critics, it’s obviously been doing something right as the stock has gone up about 40% in the past year.
At the event, the company highlighted the following opportunities for its continued momentum.
Stability of the fiber channel market
Many industry and financial analysts have been calling for the demise of the fiber channel market and have predicted a decline in the overall market size. I think this thought process is flat out wrong. I’m expecting the growth to certainly be modest, maybe 1% to 2%, but that’s a far cry from an outright decline. The predicted decline is based on the thought that storage connectivity would shift to Ethernet, but that hasn’t happened yet. The fact is fiber channel is the best protocol for storage, just like Infiniband is the best protocol for cluster computing. The last version of fiber channel (16 Gig or Gen 5, as Brocade calls it) brought better diagnostic information and visibility tools so fiber channel evolution has been about more than just speed.
The speed and reliability of fiber channel makes it ideal for the growing number of all flash systems, and many emerging market countries are buying fiber channel for the first time. All of this bodes well for Brocade’s fiber channel business and the market could actually see some acceleration in 2006 when 32 Gig fiber channel hits the market.
The emergence of the "New IP" network
During Carney’s keynote, he talked about the growth opportunities created by the shift to a new IP network. The thesis behind the new IP network is that the static, vertically integrated and proprietary network devices of the past will not cut it as cloud, mobility, and big data become the norm. Networks need to have the same level of agility as the rest of IT and, for the most part, they do not. This means the ability to scale up, down, and horizontally on demand. It also means products that are open and standards-based so they can plug into other SDN solutions and orchestration platforms. Brocade has been one of the most aggressive network vendors when it comes to open networking supporting Open Daylight, OpenFlow, and OpenStack. Additionally, its VCS fabric has been gaining momentum and is an ideal foundation for SDN.
The shift to network functions virtualization (NFV)
Brocade acquired one of the NFV pioneers, Vyatta, back in 2012. The company has seen over 1.5 million downloads of its open source Vyatta products, including virtual routers, security devices, and load balancers. While the open source versions don’t contribute any revenue, it creates a huge install base of organizations using the product. The company talked at length about its opportunity with NFV as it converts customers using the free version to paying for a licensed version that includes support and other benefits. The company claimed that it now has over 50 NFV trials with service providers and expects adoption to hit the network edge first, where the ability to create on-demand services becomes a competitive differentiator. Additionally, Brocade recently announced its OpenDaylight-based Vyatta controller, which should become the centerpiece of the company’s NFV and SDN strategies. Based on this, the company should see NFV provide meaningful revenue by 2016.
While some consider Brocade nothing more than an old school storage vendor, the company has done a great job of innovating in the traditional fiber channel market, as well as the emerging SDN and NFV arenas.