Investment Themes in Data Center Infrastructure

September 2001

Chris LeBlanc – Data Center Systems & Software

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Overview

Defining the Ecosystem

Data Center Issues

Segment Review

Service Providers

Software

Servers

Storage Fabric

Storage Subsystems

Components

Industry Status

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Defining The Ecosystem

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Data Center Ecosystem– Functional Disaggregation over Time

HubsRAS

RoutersSwitches

Host Terminal Era

Internet Computing

ConvergedInternet

Computing

Client ServerLAN19851975 1995 Today

Storage Systems

CommercialServers

LAN Servers

Network Hardware

StorageServer

Networking

Direct Attach

SANNAS

File ServersDatabase

WorkgroupSecurity

etc.

File Appliancesemail Appliances

WebservingStreaming Media

VoIPSSL Accelerators

Database Appliance

Storage Mgmt.Replication/Recovery

CachingVPN Systems

FirewallsLoad BalancingRemote Access

RoutersSwitches

Component and Software Standardization Increasing

Source: Broadview

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Data Center Ecosystem

Systems &

Applications

Management

Systems &

Applications

Management

IP Traffic ManagementIP Traffic Management

ServersServers

Storage ApplianceStorage Appliance

Storage FabricStorage Fabric

Storage SubsystemsStorage Subsystems

ComponentsComponents

Storage & Service

Providers

Storage & Service

Providers

Corporate

Enterprises

Corporate

Enterprises

Network ManagementNetwork Management

Storage ManagementStorage ManagementS

YS

TE

MS

SO

FT

WA

RE

SNI, MSI, Storability, Sanrise, Inflow, Qwest, EDS,

IBM, CGEY

Adaptec, Aarohi, Trebia, Aristos, LSI, Vitesse, Patys, Agilent, Qlogic, Alacritech, JNI, Emulex, Redswitch,

Finisar, Tidelwire, Intel, IBM, Banderacom, Lane15, Troika,

Highband, Mellanox, Agere

Fibre Channel, TCP/IP, iSCSI, RAID, Processors

$5B

$13B

$0.7B

SSPs

$440B

IT Services

$85B

Security, load balancing, content acceleration,

caching

Application, Web, Database, blades, clusters,

NAS, NAS heads

Gateways, Routers, Virtualization

SAN switch (FC, IP), Directors, HBAs

Disk and Tape Arrays

Cisco, F5, Radware, Resonate, Coyote Point, CheckPoint,

Packeteer, TopLayer, Allot, Inktomi, InfoLibria, CacheFlow, Network Appliance, NetScaler, Desana

Sun, Dell, IBM, HP, Compaq, IB- (OmegaBand, Divergent) NAS-

EMC, NetApp, BlueArc, Lefthand, Spinnaker, PanasusAuspex, Agile,

Zambeel, 3ParData, Confluence

Nisan, Crossroads, Pathlight, SanValley, SanCastle, Lightsand,

FalconStor, Datacore, Vicom, Pirus, Datadirect, Entrada, ATTO,

CNT, TrueSAN

Brocade, Qlogic, McData, EMC, Inrange, Cisco, Vixel, Gazoox, Maranti, Andiamo, Rhapsody,

YottaYotta, Cereva, JNI, Emulex

EMC, HDS, Compaq, Seagate, Mylex, Exabyte, IBM, Sun

Monitoring, security, management, and

provisioning of applications and systems

Monitoring, security management, &

provisioning of network connections

Backup, recovery, mirror, file & volume mgmt, SAN mgmt, SRM, provisioning

BMC, Quest, NetIQ, HP Openview, CA, Tivoli, Dorado,

Terraspring, Syndesis

Micromuse, Syndesis, CoManage, Telcordia, Metasolve,

Orchestream, Harmony, Astacom, Trendium, Concord, Quallaby,

Visual, Broadjump, Tibco, IP Hwy

Veritas, Legato, BMC, CA, EMC, SUN, IBM, HDS, Trellisoft, Prisa, InterSAN, CreekPath, Astrum, CommVault, Kom, TeraCloud,

Prisa, SANavigator, OTG, Tricord

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Data Center Issues Lower Cost of Ownership

– Managing a gigabyte of storage in five times the capital cost– Costs are escalating and can’t hire skilled staff– Currently not efficiently using resources, installed 75TB and using only 25TB– SANs are to expensive to deploy

Increase Ease of Management– To manage data on 10 servers, have to be in 10 places at the same time. Cannot manage storage here and in remote sites from

one place – Currently need a platoon of computer science PhD’s to get a SAN running. – Want to bring in new servers without having to bring in new storage.– Grow storage dynamically and shift storage from the pool to any server without bringing servers down.– SAN security is an issue. An employee could plug into our fabric to gain access without any authentication. – My Linux server has more storage than it needs and my Sun’s do not have enough. – Cannot get get a centralized view of storage without putting another device in the data path – Tools to provision network storage are limited.

High Availability and Application Performance are Critical– Operations are always on. Data and applications must be available 24x7– Application requirements are not matched to storage resources.– Backup and recovery should not be affected by resource adds and changes.– IO throughput lagging processor speed increases– More users are accessing more and more data simultaneously (via corporate databases)– Need to reduce latency and bottlenecks to ensure application performance– Passing file space thresholds is a common problem threatening uptime.

Interoperability (Vendors & Files) is Limited– Building individual islands of information behind IBM, Sun, W2k and Linux servers. – Nothing works together unless bought from a single vendor, would like to use SAN precisely to mix and match among vendors.

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Cost of Ownership

DAS NAS SAN

Installation 0% 0% 4%Network HW 0% 0% 11%Software 7% 9% 9%Backup HW and media 15% 27% 25%Storage subsystem 31% 51% 39%People 47% 13% 12%

100% 100% 100%

Installation - - 0.02Network HW - - 0.04Software 0.06 0.03 0.03Backup HW and media 0.13 0.09 0.1Storage subsystem 0.26 0.18 0.15People 0.39 0.05 0.05

Cost per MB $0.84 $0.35 $0.38

Storage subsystems dominate TCO, suggesting resource utilization will grow in importance.

SAN network hardware remains high, suggesting an opening for IP-based SANs.

Distinctions between NAS and SAN TCO advantages are not clear (per Merrill Lynch).

Equipment for 0.5TB SAN Cost (x1) Support

File/Volume Mgmt Veritas $3.5 $1.0SAN Software Veritas $28.0 $2.0

IP Switch (26 port) Cisco $2.0IP Router (2 port) Cisco $2.5 $1.0

Server Sun Sparc $15.0Server Sun Sparc $5.0Server NT $6.0

HBA (FC) Emulex $1.2 x3

FC Switch (16 port) Brocade $18.0 x2

HBA (FC) Finisar $1.5

RAID (8x76GB) XIOTech $77.0 $11.0RAID software XIOTech $63.0

Tape Backup Exabyte $65.0

SAN router Crossroads $10.0

Source: Merrill Lynch, CreekPath

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Application Availability and Performance

Servers

LAN

Storage Subsystems

Hub

Router

DSL

Dial up

Cable Modem

Client

InternetGrowing number of users, faster connections and increasing use of rich contents is challenging Internet (and Enterprise) backbones to process an increasing number of transactions and more data per transactions

This is placing an increasing I/O processing (performance) burden on servers and storage subsystems.

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Application Availability and Performance – Shifting Bottlenecks

Netwo

rk

Netwo

rkIP Traffic Mgmt.IP Traffic Mgmt.

Server File SystemServer File System

Switch/RoutersSwitch/Routers

SAN Fabric.SAN Fabric.

Server IO

Storage SubsystemStorage Subsystem

ApplianceAppliance

NAS File SystemNAS File System

Storage SubsystemStorage Subsystem

Server IO

Switch/RoutersSwitch/Routers ClientClient100 Mbps

Disks

Disks

PCI = 528 MbpsPCIx =1056 MbpsIB =2500 Mbps and 10000 Mbps

1.5 Mbps100 Mbps

1000 Mbps

100 Mbps1000 Mbps

10000 Mbps

To remote data center resources

SCSI = 1280 Mbps (160 MB/s)Disk Access SpeedTape Access Speed

FC, GE = 1000 Mbps

1.5 Mbps100 Mbps

1000 Mbps10000 Mbps

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Multiple Protocols will Co-Exist in Future Data Centers

SCSI for legacy device attachment to servers TCP/IP and iSCSI for long-distance interconnects and NAS connection Fibre channel for high performance SANs InfiniBand for the “intra-cluster” network

SCSI

Fibre Channel

FC Tunneling over IP

Gigabit Ethernet/iSCSI

InfiniBand

Time

Dat

a T

hro

ug

hp

ut

Sp

eed

80 MBs

1 Gbps2 Gbps

Transitional Solution

Employ existing IP infrastructure

10 Gbps Optimized

I/O protocol

25 m

10 km

unlimited distance

Today

Source: Broadview

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Multi-Protocol Support

InfiniBandComes to Life

Storage Over IP:The Debate Ensues

IP technology would allow use of existing management platforms and existing IP infrastructure, eventually enabling one worldwide enterprise storage network

Suitable in the near term for low-latency applications, this technology still faces performance issues

Fibre channel is years away from becoming irrelevant

Chip Level

Agilent

Banderacom

HiBand

InfiniCon Systems

Mellanox

Management

Lane15 Software

VieoEntrada

Cisco – Brocade

Vixel - Lucent

SAN Valley Systems

SANCastle

FalconStor

Gadzoox

Adaptec

NuSpeed (Cisco)

3ware

NetConvergence

Platys

EMC

QLogic

Nishan

CNT

Pirus

Fibre Channel over IP

iSCSI Proprietary Native IP

Technology would provide I/O performance, reliability, and scalability enhancement

Still nascent as standards continue to evolve and major players back numerous start-ups

Large investment opportunity still exists, especially on the emerging fabric software management front

OmegaBand

Paceline Systems

Redswitch

RocketChips (Xilinx)

Silicon Bridge

Source: Broadview

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SEGMENT REVIEW

IT Service Providers

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IT Services Market Size ($ millions, worldwide)

* Includes SSP services that are resold or OEMed (i.e., rebranded) by Internet data centers, Web hosting firms, and other organizations.

** Represents discrete storage utility offerings that are designed, marketed, and delivered by Internet data centers and Web hosting firms with their own personnel and infrastructure. Does not include sell-through or rebranding of SSP offerings.

2000 2001 2002 2003 2004 2005

IT consulting 19,299 21,335 23,684 26,103 28,723 31,487Systems integration 71,741 81,077 93,182 107,253 123,729 142,096Custom application development and maintenance 18,363 19,318 20,606 21,967 23,422 25,269Processing services 72,801 78,421 84,604 91,189 97,618 103,815IS outsourcing 56,494 63,996 72,122 80,714 90,252 100,201IT training and education 22,445 25,454 28,863 32,461 36,439 40,904Hardware support and installation 43,429 44,364 45,269 46,476 47,854 49,404Packaged software support and installation 41,414 47,953 55,759 64,831 75,229 86,571Application outsourcing 10,760 13,428 17,210 22,766 29,973 38,949Network consulting and integration 18,207 21,167 25,014 29,394 34,041 39,839Network infrastructure management 19,939 23,387 27,245 31,507 36,288 41,766Total 394,892 439,901 493,559 554,661 623,568 700,301Total (US) 186,781 206,850 232,279 262,945 297,265 334,952

2000 2001 2002 2003 2004

Pure-play storage service providers* 143 350 1,292 2,826 3,491 3,708Storage product suppliers 1 104 285 415 575 615Internet data centers/Web hosting firms** 2 85 395 1,425 3,245 4,425xSPs 2 35 60 85 105 117Resellers/integrators 2 20 85 115 145 160Telcos 3 88 255 632 1,253 1,680Worldwide - SSP 153 682 2,372 5,498 8,814 10,705United States - SSP 139 559 1,770 3,601 5,608 6,643

2005

Source: IDC

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Directions in IT Services (IDC)

Outsourcing of Many Flavors Will Continue the Upward Trend

Size Will Increasingly Matter for IT Services Firms

Consulting and Integration Services Will Have a Slower Year, Rebound in 2002

Services Delivered Online Will Continue to Take Hold

Consulting Will Decline as a Separate Segment, and a New Breed of Business Advisory Services Will Develop, Tech Players (SAP, HP,..) Enter Aggressively

Telecommunications Firms Will Attack the IT Services Industry

The Pure-Play Internet Services Firm Will Not Exist as We Know It, But in Its Place Will Be Fewer and Stronger Services Providers

Video over the Web Will Live, Then Die, as a Training Delivery Vehicle

Build Either IT Expertise (for xSPS) or Industry Expertise (for Enterprises)

Carefully Choose Your Partner(s) for the Dance (quality, not quantity)

Prepare for the Onslaught of Mobile Solutions

Pervasive Computing Will Exceed the Hype

Source: IDC

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Software Market Size ($ millions, worldwide)

2000 2001 2002 2003 2004 2005NW Service Mgmt - SP 4,506 5,418 6,426 7,608 8,969NW Service Mgmt - Enterprise 2,254 2,515 2,761 3,012 3,239Enterprise System Management (ESM) 13,787 14,313 16,442 19,004 21,762 24,880 ESM (Mainframe) 4,468 4,251 4,419 4,599 4,738 4,879 ESM (Open) 9,319 10,062 12,023 14,405 17,024 20,001

ESM (break out, MF and Open)Performance management 2,633 2,716 3,120 3,588 4,113 4,714Event automation 1,253 1,219 1,360 1,551 1,737 1,963Job scheduling 858 789 918 1,065 1,235 1,433Output management 708 767 865 988 1,113 1,238Change and configuration 1,765 1,767 1,931 2,188 2,478 2,796Problem management 1,103 1,134 1,353 1,597 1,806 2,024

Backup and archive software 2,684 2,671 3,058 3,531 4,068 4,678Storage replication 1,112 1,429 1,718 2,028 2,349 2,701Storage resource management 1,117 1,270 1,556 1,887 2,265 2,718Other storage software 552 552 563 580 598 616

Backup and archive software 2,044 2,097 2,506 2,990 3,525 4,131Storage replication 154 220 312 433 629 905Storage resource management 261 400 555 719 913 1,140

Storage Softwware, Non-MF (OS/400, Unix, Lunix, Win, other)

Source: IDC

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Software Issues and Trends Challenges

– Lowering total cost of ownership a key issue for IT – The volume of business critical data in heterogeneous system environments is increasing dramatically due to

network computing and web-base operations– Storage equipment vendors are looking to management software to differentiate solutions– The number of MBs in data centers continues to increase due to the decreasing cost per MB, thus increasing

the management complexity.– Tools to deal with heterogeneous environments, increase resource utilization, plus effectively and non-

disruptively scale storage are limited.

System and Application Management– Storage is critical to linking application, systems, and network management– Storage represents compelling lead into enterprise accounts

Network Management– Networking is still immature with respect to storage– Expect to see significant activity, as networking players enter storage via new transport platforms such as

iSCSI and Storage over IP– Network vendors will need to partner to gain block level expertise.

Storage Management– Management at the File/Record level is crucial to any storage solution– Directory management has become critical for distributed storage systems– Storage Policies and SLAs will be implemented based on business rules and application requirements– Virtualization and SRM emerging to increase resource utilization.– IT will resist pooling resources until application performance, security and availability is assured.– Automated provisioning will emerge to reduce mgmt costs

Emerging Technologies

Automation/ Policies

Virtualizaton

SRM

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Storage Management Software Market Taxonomy Breakdown

Hierarchical Storage Management (HSM) is the process of automatically moving infrequently-accessed data from high-performance, high-cost disk storage to lower-cost media

Software that distributes backup services directly to a data source, while at the same time centralizing the administration of these resources

Failover refers to software that automatically selects alternate paths to the desired storage when a link fails; Similarly, replication is an automated method for the distribution of data to geographically dispersed sites in order to keep it synchronized

Clustering is the process of connecting multiple servers together in order to provide greater overall system availability, performance, and capacity for server platforms

Storage virtualization is the process of representing multiple physical and/or logical storage volumes as a single logical storage element

Software tools that monitor, alert, and report on the health, configuration, availability, performance, and usage of networked storage resources, irrespective of a particular vendor

Software that manages and monitors the performance of a particular device or system of devices from the same vendor.

HSM/Archive

Backup/Restore

Replication/ Failover

Clustering

Virtualization

Distributed Resource Management

Device/ Element Management

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Data Center Software Stack

Monitoring Aprisma, BMCProvisioning Dorado, Ejasent, Jareva, Egenera

Monitoring (SNMP)Aprisma, BMC, CA, HP OpenView, Tivoli, Veritas

Provisioning Syndesis, TerraspringAutomated, Policy-Based Management

CreekPath, InterSAN, SNI, Veritas

BackupArcServer, Legato, OmniBack, Veritas

File/Volume ManagementEMC, Network Appliance, Oracle, Veritas

Mirroring EMC, HDS, IBM, Sun

SAN ManagementCreekPath, InterSAN, Prisma, SANavigator

Monitoring (SRM)CreekPath, Sun/Highground, Trellisoft

Switch VirtualizationBrocade, Gadzoox InRange, McData

Device Virtualization EMC, HDS, XIOtech

Application Management

Systems/Networks Management

Storage Management

Device and Switch Virtualization

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Storage Management Software Map

HSM/Archive Backup/RestoreReplication/

Failover Clustering VirtualizationDistributed

Resource Mgmt. Device/Element

Management

Data Protection System ManagementHigh Availability Internetworking

FileLinkQstar TechnologiesSolution-SoftUnitree SoftwareZantaz

Zerowait DataCore Software 1Vision SoftwareAstrum SoftwareConnex (W. Digital)InterSANNTP SoftwarePrisa NetworksRadiant SoftwareW. Quinn Associates

BakBone BakBone

Software Partners

Viathan

XIOtech (Seagate)

NSI Software

LinkPro

Rutilus Software

Innovation Data Processing

Tantia Technologies (Beta Systems AG)

Software Partners

XIOtech (Seagate)

Tantia Technologies

SCH Technologies SCH Technologies

Vixel

KOM Networks KOM Networks

Amdahl (Fujitsu)

Vixel

Amdahl (Fujitsu)

Legato Legato

Computer Associates Computer Associates

Veritas

Sun Microsystems Sun Microsystems

Sistina SoftwareTricord Systems

EMC EMC

ConnectedDantz DevelopmenteVaultFileTekKnox SoftwareLiveVaultMicroliteNovastorOnTrack Data Intl.PowerQuestQuadratecsanriseStoractiveSyncsortWorkstation Solutions

ADIC ADIC

BMC BMC

3Par DataSANgate SystemsSynaxia Networks

CommVault SystemsCommVault Systems

OTG SoftwareOTG Software

Networking Equipment

Smart Storage Smart Storage

FalconStor FalconStor

Source: Broadview

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Source: Broadview

Storage Management Systems Map

HSM/Archive Backup/RestoreReplication/

Failover Clustering VirtualizationDistributed

Resource Mgmt.

Data Protection System ManagementHigh Availability

StorageApps

TrueSAN

StorageApps

QLogic

Troika Networks

LSI Logic

Vixel

Crossroads

Amdahl (Fujitsu)

StorageTek

Brocade Brocade

DataDirect Networks

Network Appliance

Vicom Systems Vicom Systems

Sun Microsystems Sun Microsystems

Hewlett-Packard

IBM

Hewlett-Packard

IBM

EMC EMC

Dell Dell

Compaq

StoreAge Networking Technologies

ADIC ADIC

Hewlett-Packard

Cereva Networks

Land-5

Arsenal Digital Solutions

Articulent

Centripetal

Creek Path

e-DataGroup

Managed Storage Intl

NaviSite

sanrise

Scale 8

Storability

StorageAccess

StorageNetworks

StorageProvider

StorageWay

WorldStor

Storage Service Providers

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Systems - Servers

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Systems Market Size - Servers

Appliance ServersShipments 2000 2001 2002 2003 2004 2005Multifunction 17,980 35,100 63,100 111,500 187,700 262,700Web server 65,150 150,300 282,500 474,900 731,000 1,038,600Caching 22,651 40,900 80,800 145,900 250,200 325,300Security 233,639 429,200 660,900 914,600 1,165,900 1,392,300NAS 61,012 129,800 238,400 410,200 663,200 987,900Other 11,168 23,300 65,900 129,600 229,300 379,700Total 411,600 808,600 1,391,600 2,186,700 3,227,300 4,386,500Revenue ($M) 2000 2001 2002 2003 2004 2005Multifunction $24 $45 $79 $137 $225 $309Web server $162 $353 $650 $1,065 $1,594 $2,218Caching $267 $520 $978 $1,693 $2,801 $3,512Security $863 $1,535 $2,303 $3,109 $3,855 $4,511NAS $1,833 $3,347 $5,572 $8,711 $12,822 $17,309Other $234 $464 $870 $1,530 $2,420 $3,508Total $3,382 $6,265 $10,451 $16,245 $23,717 $31,366ASP ($) 2000 2001 2002 2003 2004 2005Multifunction $1,352 $1,288 $1,254 $1,226 $1,200 $1,174Web server $2,485 $2,350 $2,300 $2,242 $2,181 $2,136Caching $11,774 $12,707 $12,098 $11,600 $11,193 $10,795Security $3,692 $3,577 $3,485 $3,400 $3,307 $3,240NAS $30,045 $25,783 $23,373 $21,237 $19,333 $17,521Other $20,908 $19,931 $13,200 $11,808 $10,555 $9,238Total $8,217 $7,747 $7,510 $7,429 $7,349 $7,151

Revenue ($M) 2000 2001 2002 2003 2004 2005Entry Level ($0-$99,999) 36,380 39,985 44,968 50,472 56,211 62,189Mid-range ($100,000-$999,999) 19,380 20,393 22,005 23,607 25,392 27,223High End ($1,000,000 and up) 12,291 11,870 11,927 12,204 12,560 12,978Total $68,051 $72,248 $78,900 $86,283 $94,163 $102,390

Source: IDC

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Directions in Servers

Modular architecture with server blades and switch-based server processing fabric

Cluster servers emerge – clustering supports flexible computing through the use of

many servers, arranged in “tiers,” in Internet-style computing infrastructure

– server “nodes” ensure capacity as workloads scale up in size, and as user communities grow

– clusters will evolve over the next few years, creating opportunities for advanced clustering software, management software, hardware interconnects and servers

Solution bundling with servers

Emerging Technologies

InfiniBand

Blades

Virtual Interface (VI)

Clusters

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Systems - Switch Fabrics

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Systems Market Size – Switch/RouterRouters 2000 2001 2002 2003 2004 2005Revenue ($M) $13,013 $14,132 $15,213 $16,546 $18,302 $20,334Installed base 10,217,753 15,070,471 17,704,061 19,261,500 19,809,297 20,373,441Unit shipments 4,690,921 6,090,950 5,816,029 5,855,611 6,148,474 6,653,409ASV ($) 2,774 2,320 2,616 2,826 2,977 3,056

Revenue ($M) - Core (+1Gb) $2,842 $3,728 $4,758 $5,633 $6,416 $7,000Revenue ($M) - Edge (+1Gb) $227 $660 $1,300 $2,300 $3,500 $5,000LAN Switch 2000 2001 2002 2003 2004 2005Revenue ($M) - 10/100, 1G, 10G $14,564 $16,054 $18,436 $20,654 $22,439 $24,007Revenue ($M) - 10/100 $11,750 $11,393 $11,029 $10,486 $9,807 $8,909Revenue ($M) - 1G $2,814 $4,008 $6,016 $8,037 $10,034 $12,077Revenue ($M) - 10G $0 $653 $1,391 $2,131 $2,598 $3,021

Rev/Port Shipped - 10/100 $123 $102 $83 $70 $61 $55Rev/Port Shipped - 1G $800 $627 $569 $454 $357 $301Rev/Port Shipped - 10G #DIV/0! $40,813 $25,291 $16,267 $10,351 $7,806

Fibre Channel Fabric Revenue ($M) 2000 2001 2002 2003 2004 2005Hubs, entry 23.1 11.8 5.4 1.5 0.4Hubs, managed 49.9 20.6 13.1 4.1 1.3Switches, loop 80 83.1 48.2 22.7 7Switches, fabric 808.8 1,239.20 1,852.00 2,377.80 2,762.80Switches, directors 357.3 640.9 1,176.60 1,979.40 2,853.70Total 1,319.10 1,995.70 3,095.30 4,385.40 5,625.20Fibre Channel Fabric Port Shipments 2000 2001 2002 2003 2004 2005Hubs, entry 187,072 98,156 48,782 14,337 4,274Hubs, managed 157,549 79,285 59,623 21,506 7,938Switches, loop 94,642 118,187 102,938 71,173 31,891Switches, fabric 551,222 978,686 1,892,590 3,168,844 4,533,279Switches, directors 110,369 263,441 637,363 1,311,030 2,232,307Total 1,100,854 1,537,754 2,741,296 4,586,889 6,809,689Fibre Channel Fabric Revenue/Port 2000 2001 2002 2003 2004 2005Hubs, entry $123 $120 $111 $105 $94Hubs, managed $317 $260 $220 $191 $164Switches, loop $845 $703 $468 $319 $219Switches, fabric $1,467 $1,266 $979 $750 $609Switches, directors $3,237 $2,433 $1,846 $1,510 $1,278Total $1,198 $1,298 $1,129 $956 $826

Source: IDC

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Directions in Switch Fabrics Multi-protocol support is required

Support for NAS and SAN solutions will be required

Port densities will increase in order to flatten SAN architectures

Fabrics are trending to increased intelligence and throughput (stand alone functionality will be incorporated into switch fabrics

– Quality of Service (QoS) attributes– System Instrumentation– Real time volume mapping and load balancing– Virtualization– Protocol translation

Vendors may try to migrate storage management applications (replication, snap shot, back up, ..) from host servers to file systems within intelligent fabrics.

SANs currently remain dedicated to a single application due to concerns regarding availability, security, and performance.

Currently dominated by Fibre Channel players, who are building partnerships to address IP onslaught. IP (iSCSI) will emerge as an alternative to FC SANs in mid-tier markets that have not already implemented FC. 10 GE when available will begin to challenge FC at the high end.

Software players looking to enter this layer via the virtualization and IP switching frontier

HBA vendors facing commoditization – looking to differentiate with multi-protocol support and management capabilities. InfiniBand threatening existence and forcing design adaptation

Emerging Technologies

InfiniBand

iSCSI, StorageOver IP

Virtualization

Server-Less Backup

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Storage Ecosystem – Today

EthernetFibre-channelSCSI

LAN

NASNetApp,EMC

FC HBAQlogic, Emulex

FC SwitchBrocade, Gadzoox, Qlogic

FC-Ethernet GatewaySAN Valley, SAN Castle, Pirus,Entrada

Edge RouterCisco, Nortel, Lucent

Enterprise StorageEMC, IBM, HDS, HP

External RAIDMylex

FC HubGadzoox, Vixel

FC RouterATTO, Crossroads, Pathlight

FC JBODSeagate SCSI Disks

Seagate, Maxtor, IBM

FC SANFabric

FC DirectorBrocade, McData, Inrange

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Storage Ecosystem – 2003

EthernetFibre-channelInfiniband

LAN

NASNetApp, EMC, HP

FC/iSCSI HBA/TCAQlogic, Emulex,Troika (VI), JNI

Hybrid SwitchBrocade, Nishan, Qlogic

SAN ApplianceDatadirect, startups Edge Router

Cisco, Nortel, Lucent

Enterprise StorageEMC, Cereva, TrueSAN,IBM

External RAIDMylex FC/IB/iSCSI

RouterNishan, Crossroads, PathlightFC/IB/iSCSI

JBODSeagate SCSI Disks

Seagate, Maxtor, IBM

Hybrid SANFabric

SCSI

Infiniband

Data Center SwitchInkra, Nexsi

NAS GatewayIBM

30

Software

Hardware

Services

For Sale $

Intelligent Fabric Features and Architecture

64 x 10Gig non-blocking fabric

FC-AL SCSIiSCSIInfiniBan

dATM OC48

OC192

Operating System

Web-based

Integration with leading

vendors(iHP

OpenviewCA Unicenter

IBM Tivoli)

Support for multiple RAID

levels and caching schemes

Configuration Allocation

Storage pooling

Support for leading 3rd

party vendors(i.e. Veritas,

Legato)

Synchronous data mirroring,Asynchronous

data replication,Snap shot mirroring

Management RAID Storage Virtualization

Backup Remote data replication

31

Software

Hardware

Services

For Sale $

LAN

SAN islandSan Francisco

LAN

SAN islandWalnut Creek

SAN Gateways: SAN over TCP/IP Connectivity Need

LANSAN islandSan Jose

MAN

Storage servers

FC switch

Storage

32

Software

Hardware

Services

For Sale $

Storage Subsystems

33

Software

Hardware

Services

For Sale $

Hardware Market Size – Storage Arrays

SAN Array Systems Revenue ($M) 2000 2001 2002 2003 2004 2005Mainframe 2,023.70 1,938.20 1,939.90 2,010.00 2,100.50Open systems 6,868.40 10,119.10 13,952.20 18,056.80 23,112.60Open SAN Array Systems Revenue ($M) 2000 2001 2002 2003 2004 2005Fibre Channel 6,866.20 10,069.30 13,234.60 16,473.50 19,711.60Block IP (ethernet) 2.2 49.5 697.6 1,354.30 2,476.60InfiniBand 0 0.4 20 229 924.5Total 6,868.40 10,119.10 13,952.20 18,056.80 23,112.60SAN Array Systems Port Shipments 2000 2001 2002 2003 2004 2005Fibre Channel 1,360,313 2,632,891 4,551,047 6,797,477 8,561,697Ethernet IP 972 21,938 413,606 980,367 1,920,891InfiniBand 0 155 11,876 169,173 739,246Total 1,361,285 2,654,984 4,976,528 7,947,017 11,221,833SAN Array Revenue/Port 2000 2001 2002 2003 2004 2005Fibre Channel $5,048 $3,824 $2,908 $2,423 $2,302Ethernet IP $2,263 $2,256 $1,687 $1,381 $1,289InfiniBand NM $2,581 $1,684 $1,354 $1,251Total $5,046 $3,811 $2,804 $2,272 $2,060

Disk Storage Systems Revenue 2000 2001 2002 2003 2004OS/390 $2,153 $2,313 $2,403 $2,500 $2,611Unix $15,746 $18,385 $20,756 $23,473 $26,647 Includes:OS/400 $864 $853 $814 $778 $746 ExternalNT $11,028 $12,912 $14,616 $16,574 $18,866 InternalNOS $1,816 $1,770 $1,668 $1,575 $1,492 JBODLinux $483 $667 $891 $1,191 $1,599Other $1,836 $1,735 $1,585 $1,451 $1,332Total $33,927 $38,635 $42,732 $47,542 $53,294

Source: IDC

34

Software

Hardware

Services

For Sale $

Directions in Storage Subsystems

0

10

20

30

40

50

1999 2000 2001 2002 2003

Server-Attached Storage

NAS

SAN

Worldwide Storage Market

Source: IDC

($Billions)

Legacy server-attached storage still dominates, but networked storage is the key growth opportunity

35

Software

Hardware

Services

For Sale $

Directions is Storage Subsystems

Dominated by a number of large vendors; limited opportunities for new entrants

Incumbent vendors struggle against commoditization; expect to see differentiation on the software front, likely through M&A

Interoperability remains a large opportunity, while maintaining unique sub-system performance characteristics

Fibre Channel will remain competitive at the high end.

Infiniband for Storage?– Support From Server Vendors is High– Expected to Play a Strong Role in Clustered and Rack Optimized Environments

(e.g., Internet Data Centers)– Found Mostly in Entry Server Space– Will Surface in Server Community Early 2002– IB Storage Systems will follow in 18-24 months

NAS and SAN technologies coexist and the lines between them will blur (ie. NAS head with SAN fabrics behind it, intelligent SAN fabrics)

Source: TSP, Broadview

36

Software

Hardware

Services

For Sale $

Components

37

Software

Hardware

Services

For Sale $

Components Market Size (estimate)

2000 2001 2002 2003 2004 2005SAN Switch/Director Chip Revenue ($M) $125 $255 $347 $592 $882HBA Chip Revenue ($M) $185 $303 $445 $560 $715NAS Chip Revenue ($M) $276 $510 $781 $1,183 $2,016RAID Array Chip Revenue ($M) $1,391 $1,669 $1,727 $1,689 $1,625SAN Gateway Chip Revenue ($M) $52 $161 $244 $300 $320Total ($M) $2,028 $2,898 $3,545 $4,323 $5,559

SAN Switch/DirectorsNumber of Ports per Switch/DirectorSAN Switch/ Director ports 1,002,206 2,041,023 3,473,107 5,915,001 10,080,727Number of storage chips/ port 0.25 0.25 0.25 0.25 0.25Number of storage chips 250,552 510,256 868,277 1,478,750 2,520,182Chip ASP $500 $500 $400 $400 $350Chip Revenue ($M) $125 $255 $347 $592 $882

NAS Units 250,552 510,256 868,277 1,478,750 2,520,182Number of storage chips/ NAS box 2 2 2 2 2Number of storage chips 501,103 1,020,512 1,736,554 2,957,501 5,040,364Chip ASP $550 $500 $450 $400 $400Chip Revenue ($M) $276 $510 $781 $1,183 $2,016

Storage Arrays 3,125,000 3,750,000 4,312,500 4,743,750 5,218,125% of RAID storage units 89% 89% 89% 89% 89%Number of RAID storage units 2,781,250 3,337,500 3,838,125 4,221,938 4,644,131Number of Chips per RAID Storage Array 1 1 1 1 1Number of Chips 2,781,250 3,337,500 3,838,125 4,221,938 4,644,131Chip ASP $500 $500 $450 $400 $350Chip Revenue ($M) $1,391 $1,669 $1,727 $1,689 $1,625

38

Software

Hardware

Services

For Sale $

Storage Semiconductor Market

EthernetFibre-channelInfiniband

LAN

NAS2005: $168M

FC/IB/iSCSI HBA/TCA2005: $715M

Hybrid Switch /SAN Appliance2005: $882M

SAN Connectivity/ Edge Router2005: $278MHybrid SAN

Fabric

SCSI

Infiniband

RAID Controller2005: $826M

*Market Numbers indicate estimated TAM in FY2005

39

Software

Hardware

Services

For Sale $

Directions in Storage Components

The shift from DAS to networked storage is creating an new component market segment

– Access to multiple, diverse servers is needed– Access to multiple drives is needed– Geographic access has expanded– Multiple protocols must be supported (networking, storage, IO, file systems)

Moving to increased throughput (10 Gbps) to ensure application performance.

– Hardware acceleration is needed (TCP/IP, RAID, Virtualization, File Systems)– Issues (# of TCP connections, state maintenance, window scaling, memory and CPU

requirements )

Moving to increased intelligence in the fabric– Quality of Service (QoS) attributes– System Instrumentation– Real time volume mapping and load balancing– Virtualization

40

Software

Hardware

Services

For Sale $

Industry Status

41

Software

Hardware

Services

For Sale $

Acquisition and Partner Activity

Sentryl

Multiple

EMC, Compaq

IntelliguardSun

Multiple

Multiple

Veritas

MultipleLSC

Seagate

Vinca

Troika, Veritas, Legato

Compaq

QLogicQLogic

LiveVault

HSM/Archive Backup/RestoreReplication/

Failover Clustering VirtualizationDistributed

Resource Mgmt.

Data Protection System ManagementHigh Availability Internetworking

Pathlight PathlightPathlight

Crossroads

Sun

VeritasVeritas, Legato

NuSpeed

Legato, NTP Software

Compaq, LegatoConvergeNetNuView - since

acquired by Veritas

EMC, Brocade

EMC

BMC, CASoftworks, CrosStor

EMC

HP, Legato Multiple

Transoft

HP

Tivoli, CA, Veritas

Crossroads, QLogic

HighGround

Legato

Net. Aoo.

McData, Network App.

MultipleNuViewSun

LMG

QLogic

Veritas

Tivoli, CA, Vixel

Net App.

BMC, HighGroundOrca

LSC HighGroundBrocade

Multiple BMC

BMC, Veritas

BMC, Veritas

Ancor

QLogic

QLogicData General

Seagate, TeleBackup

Multiple

Multiple

Multiple

Multiple

Multiple

Acquired1

Partnership

CA Multiple

Device/Element Management

Networking Equipment

1 Acquisitions since January 1, 1999.

Primary Offering

Source: Broadview

Compaq

CA

Sun

Legato

EMC

IBM/Tivoli

HP

Dell

QLogic

Amdahl (Fujitsu)

Cisco

BMC

Veritas

McData

Brocade

Netowork Appliance

ADIC

42

Software

Hardware

Services

For Sale $

M&A Opportunities Expanding To Neighboring Segments

Softw

are

Har

dwar

e/Sy

stem

sN

etw

orki

ngTraditional Storage Players Potential Entrants

Compaq

Dell

EMC

HP

IBM

Sun

Precise

Quest

NetIQ

Mercury

Performance Management Vendors

Platform Vendors

Optical Vendors

Finisar

ONI Networks

Storage SoftwareVendors

Legato

Veritas BMC

Computer Associates

Traditional Systems Management Vendors

Greater intelligence at the edge will be facilitated through storage-based solutions

Capitalize on need for high performance

technologies

Need to manage data generated by performance software

Alcatel

Cisco

Nortel

Internetworking Vendors Caching/Streaming Vendors

Akamai

Inktomi

HBA VendorsTape, Drive Vendors

Source: Broadview

43

Software

Hardware

Services

For Sale $

Market Capitalization ($m) – 10/12/01Name Mkt Cap

DELL COMPUTER 61662

SUN MICROSYS 31082

EMC CORP 27661

COMPAQ COMPUTER 16618

BROCADE COMMS 5359

NETWK APPLIANCE 3566

QLOGIC CORP 3137

EMULEX CORP 1607

EXTREME NETWRKS 1418

ADAPTEC INC 919

INKTOMI CORP 603

INRANGE TECHS 513

AKAMAI TECH INC 453

COMPUTER TECH 445

CHECKPOINT 368

F5 NETWORKS INC 364

J NI CORP 193

INTERNAP NETWK 154

RADWARE LTD 147

PACKETEER INC 123

CACHEFLOW INC 71

CROSSROADS SYS 70

DOT HILL SYS 37

GADZOOX NETWRKS 34

VIXEL CORP 33

Name Mkt Cap

SAP AKTIENGESELL 37376

COMPUTER ASSOC 16331

VERITAS SOFTW 10803

SIEBEL SYSTEMS 8857

PEOPLESOFT INC 8229

AMDOCS LTD 6214

CONVERGYS CP 4495

BMC SOFTWARE 3733

CSG SYST INTL 2177

BUSINESS OBJ 1535

ILLUMINET HLDGS 1439

MICROMUSE INC 807

LEGATO SYSTEMS 694

DOCUMENTUM 494

OPEN TEXT CO 469

E.PIPHANY INC 431

METASOLV INC 276

PORTAL SOFTWARE 243

OTG SOFTWARE 178

CONCORD COMM 158

IMANAGE INC 99

RESONATE INC 82

IXOS SOFTWARE 78

TUMBLEWEED COMM 72

BLUE MARTINI SF 68

VISUAL NETWORKS 57

BRIO TECHNOLOGY 40

ORCHESTREAM ADR 35

NET PERCEPTIONS 28

SO

FT

WA

RE

SY

ST

EM

S

Source: Yahoo Finance

44

Software

Hardware

Services

For Sale $

Recent Private Financings

Space Company Raise Post $ Datesw Datacore $35 $250 May-00sw Vicom $20 Jun-00sw Prisa $12 $38 Oct-00sw Astrum $5 $13 Mar-01sw Intersan $8 $30 Apr-01sw NO Boundries $12 pendinghw Stonefly $10 $21 Jan-00hw Network Storage $10 $13 Oct-99hw Rhapsody $12 Jun-00hw Yotta Yotta $17 $50 Jul-00hw Exanet $9 Oct-00hw Cereva $20 $1,400 Nov-00hw TrueSAN $30 $80 Dec-00hw BlueArc $72 $312 May-01hw Panasas $30 $67 pendinghw Spinnaker $20 pendingchips Alacritech $15 Oct-99chips iReady $20 $120 Feb-00chips Cicadia $15 Jul-00chips PetaSwitch $4 $19 Jun-01

Source: VentureSource

45

Software

Hardware

Services

For Sale $1 Through March 15, 20012 Number of deals where data available for each time period are 12 for 1999, 8 for 2000, and 1 for 2001 YTD

Storage M&A Activity1

Median Deal Size 2 $54MM $61MM $265MM

Median Price/Revenue 2 3.1x 1.6x 13.2x

Total Consideration 2 $1,878MM $2,891MM $265MM

Storage M&A Activity Summary1

8 8 85

4 54

66

32

2

0

5

10

15

20

1H99 2H99 1H00 2H00

# o

f T

ran

sa

cti

on

s

Software & Services Networking Equipment Drives/Devices

14

1819

10

1999 2000 2001YTD

5

3

9

1H01 YTD

1

Source: Broadview

46

Software

Hardware

Services

For Sale $

Sample of M&A Deals

1 Prices at announce, adjusted for seller’s cash and debt when available.

Announce

Date Buyer Seller

Adjusted

Price1 ($MM)

Storage Software

11/01/00 EMC CrosStor Software 300.0

12/21/99 EMC Softworks 187.4

09/09/99 Dell Computer ConvergeNet Technologies 340.0

06/07/99 Legato Systems Vinca 94.0

05/11/99 Quantum Meridian Data 62.203/29/99 Amdahl Sentryl Software 36.0

03/08/99 Sterling Software Spectra Logic 32.8

01/28/99 Legato Systems Intelliguard Software 52.0

Announce

Date Buyer Seller

Adjusted

Price1 ($MM)

Storage Networking Equipment

07/27/00 Cisco Systems NuSpeed Internet Systems 450.0

05/08/00 QLogic Ancor Communications 1,491.9

03/03/00 Gadzoox Networks SmartSAN Systems 23.5

02/29/00 Adva AG Storage Area Networks 83.0

02/03/00 Crossroads Polaris Communications 35.7

12/03/99 Seagate XIOtech 360.0

08/09/99 EMC Data General 1,054.8

07/27/99 IBM Mylex 223.5

04/30/99 Box Hill Systems Artecon 54.9

Storage Services

01/10/01 Inrange Technologies Prevail Technology Conf

10/26/00 TriSys Ripdata Conf

06/21/00 SAN Holdings Value Technology 6.8

01/27/00 Sterling Software Retrieve 18.0

12/07/00 Emulex Giganet 621.312/04/00 Sun Microsystems HighGround Systems 400.0

01/30/01 ADIC Pathlight Technology 256.6

02/02/01 Sun Microsystems LSC 74.0

08/17/99 Veritas NuView Conf

01/23/01 QLogic Little Mountain Group 30.0

06/13/00 Network Appliance Orca Systems 50.0

Storage Drives & Devices

10/04/00 Maxtor Quantum (Hard Disk) 967.5

04/26/00 Komag HMT Technology 297.4

11/01/99 Adaptec Distributed ProcessingTechnology

235.0

12/29/00 Maxoptix Breece Hill Technologies Conf

02/05/01 Cypress Semiconductor HiBand Semiconductors Conf

02/27/01 YottaYotta QLogic (AdaptiveRAID) Conf01/23/01 sanrise DataVault (Exodus) Conf

03/22/01 OTG Software Smart Storage 23.1

03/27/01 Pirus Networks Blue Spruce Networks Conf

Source: Broadview

April-01 Sun Microsystems Highground 400July-01 Hewlett Packard StorageApps 350Sept-01 McData SANavigator 30Sept-01 Precise W.Quinn 35

47

Software

Hardware

Services

For Sale $

Dell, EMC, Intel, And Quantum Are Among The Most Active Strategic Investors In Storage

Strategic Investor Representative Private Storage Investments

ADIC Benchmark Storage Innovations , LiveVault, SkyDesk

Cisco San Valley Systems, StoreAge Networking Technologies

Compaq Lane15 Software, Prisa Networks

Dell LiveVault, Nishan Systems, NSI Software,

StorageApps

EMC Driveway, FreeDrive, ManagedStorage Intl., MyPlay,

Siros Technologies, SkyDesk, Xdrive Corporation

Intel Banderacom, Cereva Networks, Connected, Lane15

Software, Omneon Video Networks, Prisa Networks

LSI Logic NetCell, StorageApps

Quantum Benchmark Storage Innovations, Nishan Systems,

StoragePoint, TeraStor, 3ware

StorageNetworks Pirus, StorageApps, Vicom Systems, Xdrive Corporation

Sun Microsystems Nishan Systems

Veritas Pirus, 3ware, sanrise, Xdrive Corporation

Source: Broadview