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Significant Changes Dell'Oro Group continually revises and modifies the methodology used to report shipments, calculate market share and categorize products. The items listed below represent significant changes that we have instituted recently or will implement in the near future. ChangesThis Report We removed 2 Gbps Fibre Channel (FC) from our Vendor Tables, but the data remains in our Worldwide Tables. In the notes section of the adapter Vendor Tables, we report Fibre Channel over Ethernet (FCoE) Adapter and LAN on Motherboard (LOM) shipments, prices, and revenues by manufacturer. In the notes section of the Worldwide Tables, we report FCoE Switch port shipments, prices, and revenues on a market level. In the notes section of Table 3 in the Worldwide Tables, we added the portion of FC Switch ports shipping with 8 Gbps optical pluggable modules. ChangesFuture Reports We plan to separate our Storage Area Network (SAN) report in the future, likely with our 1Q11 report. We plan to combine FC switches in the same program as our Ethernet switches, and to report FC adapters in the same program as our Ethernet adapters (program is named Controller and Adapter). We also plan to also separately report FCoE in each of these programs.

Overview Server and Storage Market Enterprise and service provider spending on datacenter equipment continues to improve. Servers, storage arrays, and the SAN equipment that connects the various elements registered another quarter of growth during 3Q10. FC SAN equipment typically sells in conjunction with other equipment; specifically, FC switches sell together with storage arrays, and FC adapters sell with servers. Note that sales levels in the storage equipment and server markets are orders of magnitude larger than adjacent sales of FC SAN equipment. For example, typical annual storage equipment sales approximate $30 B and server sales approximate $50 B, while FC SAN sales approximate $2.5 B.
Figure 1: FC Switch and Storage $600 Equipment Revenue

$6

$400

$3

$200

$0
4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10

$0

* Storage revenue from Dell, EMC, HDS, HP, IBM, NTAP, and Oracle

Figure 2: FC Adapter Port and Server Unit Shipments 1,200 2.5

Server Units in Millions (Bars) 2.0 1.5 600 1.0 0.5 300 900 HBA Ports in Thousands (Line)

Looking at these adjacent markets gives us insight into two important 0.0 0 factors for the FC SAN market: one, what the near-term outlook is for the storage equipment and server markets; and two, how FC SAN equipment is keeping pace with the growth rate of equipment it connects. If FC is slowing, is it being substituted by alternative technologies such as FCoE and iSCSI? Let us consider the storage equipment to FC switch relationship first. DellOro Group estimates that during 3Q10, storage array sales for certain of the manufacturers we trackin this case, Dell, EMC, Hitachi, HP, IBM, NetApp and Oraclerose 15% versus the year-ago period. The correlation of FC switch sales to storage equipment is portrayed in Figure 1. These two markets certainly appear over the past 32 quarters to be tightly correlated, rising and falling together. However, the correlation of storage and FC switch sales may diverge in the future, as alternative SAN technologies such as FCoE and iSCSI
4Q 0 1Q 8 09 2Q 0 3Q 9 0 4Q 9 09 1Q 1 2Q 0 1 3Q 0 10

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Switch Revenue in $ Millions (Line)

$9 Storage Revenue in $ Billions

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Overview (Cont.) gain popularity. Figure 2 on the prior page, reflects that FC adapter port shipments have begun to slow versus server unit shipments. The correlation between servers and adapters has also been tightly correlated over the past several years, however in 2010 we note a divergence. In terms of full-year 2010 versus full-year 2009, we estimate that FC adapter port shipments will rise only 5% versus a gain of between 15%-to-20% for server unit shipments. We attribute the divergence to FCoE and iSCSI gaining traction in server-to-storage connections and taking market share from FC; therefore, we believe that FC adapter growth is not as closely correlated with server unit growth as FC switch is to storage equipment. We discuss this topic in more detail in the Adapters section. Overall Storage and Server Markets Taking a step back to look at the performance of the large storage and server manufacturers in 3Q10, we note that strength was broad-based. For example: Dells server revenue was up 20% versus the year ago period; this marks the companys fourth sequential quarter with year-over-year server revenue growth of 20%-to-40%. While its overall storage revenues were up 7% Y/Y, Dells EqualLogic iSCSI-focused storage product line was up 66%, respectively. Note again the traction that iSCSI is gaining in the space. Dell senior management suggests full-year total company revenue growth for 2011 of 14%to-19% over 2010 levels. EMCs storage product revenue also grew 20% during 3Q10 versus the yearago quarter on top of gains of 27% in 2Q10 and 28% in 1Q10, respectively. 3Q10 storage product sales levels are within 10% of EMCs all-time high of $2.3 B (excluding VMware), which the company achieved during 4Q08. Senior management increased its guidance for 4Q10 by approximately 10% and projected that EMC would deliver double-digit overall revenue growth over the next few years. Hitachis storage business rose approximately 13% Y/Y, with notable strength coming from its North American based Global Storage Technologies division (16% Y/Y growth in 3Q10, 36% in 2Q10, and 42% Y/Y in 1Q10). On November 2, 2010, this division of Hitachi announced it is preparing for its initial public offering, but the timing was not given. HP out-performed its previous revenue guidance for its fiscal quarter ending

Overview (Cont.) October 31, with its Enterprise Storage and Server business growing 25% Y/Y, with servers growing about twice the rate as storage. HPs storage business has been growing in 10%-to-16% Y/Y for the past three quarters. For its fiscal year ending July 31, 2011 HP management guided to approximately 5% revenue growth, slightly lower than the 6% rate of its fiscal year just ended in July, 2010. IBM achieved the highest revenue growth for Systems and Technology (the companys server and storage products) in six years, up 10% Y/Y. This growth was driven by new product introductions and IBMs highest volume server, named system x. Server revenues were up 11% Y/Y while storage was up 7%. IBM raised its guidance for 4Q10 performance. Intel achieved its second sequential quarter of record server processor revenues, posting 30% Q/Q growth. Senior management attributed this growth to its high-performance processors, Westmere and Nehalem, and in particular credited the cloud segment (which we interpret to mean service providers rather than enterprises), in which unit shipments were up 200% versus the year-ago period, which translates to a gain of 50% Q/Q. The next generation processor, named Sandy Bridge, is expected to begin revenue generation in 4Q10, and early customer demand is much greater than Intel management predicted. Overall FC SAN Market Overall combined sales of FC switches and adapters rose 7% Q/Q to $622 M while port shipments rose 6% Q/Q to 2.4 M. Y/Y sales are up 9%, and port shipments are up 11%. During 3Q10, port shipment levels were almost at the all-time quarterFigure 3: FC SAN Revenue
$350 Brocade Revenue in $ Millions $280 $210 $140 $70 Other $0
07 08 08 08 08 09 09 09 09 10 10 10 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

QLogic

Cisco Emulex

Figure 4: FC SAN Port Shipments

1.2 Port Shipments in Millions Brocade 0.8 QLogic 0.4 Cisco Emulex Other 0.0
4Q 0 1Q 7 0 2Q 8 08 3Q 0 4Q 8 0 1Q 8 09 2Q 0 3Q 9 0 4Q 9 09 1Q 1 2Q 0 1 3Q 0 10

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Overview (Cont.) level highs achieved during 2008 (Figures 3 and 4, prior page). Strength came primarily from switches, in particular from high-end modular switches from both Brocade and Cisco, followed by blade switches, where sales levels from Brocade and QLogic rose. Overall FC adapter sales and port shipments were up modestly Q/Q (rising 2% and 4%, respectively). Adapter sales were up for both Emulex and QLogic driven by 8 Gbps products, but sales were down for LSI which has 4 Gbps, and does not plan to offer 8 Gbps.
Figure 5: 2010 Year to Date Revenue (1Q Through 3Q) $1,000
FCoE FC $500

Overview (Cont.) networks. For example, two FCoE switches cannot be connected, and servers running the UNIX operating system communicate poorly if connected by FCoE to other elements of the network. However, we expect new FCoE switch products to come to market in early 2011. Many of the technical challenges that FCoE faces may disappear with these new products, and users may flock to purchase them. In this case, our full-year 2010 forecast for FC switches (and adapters) may be too high. We turn our discussion to more detail on the changes occurring in the network adapter market as the shift to FCoE is happening more rapidly with adapters than it is with switches (Figure 7).

Revenue in $ Millions

$750

$250

$0 Brocade Cisco Emulex QLogic

Figure 6: 2010 Year to Date Port Shipments (1Q Through 3Q)

3.2 Port Shipments in Millions FCoE

Figure 7: FC and FCoE SAN Ports

Port Shipments in 000's Switch FCoE Switch FC % FCoE Adapter + LOM FCoE Adapter + LOM FC % FCoE 1Q09 5.0 1,366.6 0% 1.7 614.2 0% 2Q09 10.0 1,336.3 1% 3.1 640.5 0% 3Q09 20.0 1,453.6 1% 11.7 716.6 2% 4Q09 1Q10 40.0 50.0 1,653.2 1,631.2 2% 3% 21.8 875.2 2% 29.1 758.3 4% 2Q10 90.0 1,523.5 6% 44.3 755.6 6% 3Q10 100.0 1,625.0 6% 158.6 782.2 17%

We model FC switch sales to rise 2.4 FC 3% (to $1.9 B) in 2011. This is a slower rate than what we saw for FC 1.6 switches in 2010; we expect the slowing largely because we predict 0.8 FCoE will begin to supplant FC switches in blade servers by mid0.0 2010. During 4Q10, two large Brocade Cisco Emulex QLogic suppliers of blade servers, HP and IBM, as well as new entrant Cisco, will be offering FCoE switch and adapter solutions. We expect users will embrace an FCoE solution inside a blade server chassis as a replacement for an FC switch, as the user needs only one FCoE switch rather than two FC switches (FC requires one Ethernet switch for the LAN and one FC switch for the SAN). Figures 5 and 6 portray FCoE revenues and port shipments for switches and adapters. We model FC adapter sales to rise 2% (to $694 M) in 2011, as increases in adapters for stand-alone rack and tower servers offset declines in adapters for blade servers (mezzanine adapters). As of this writing, FCoE technology cannot gain traction over FC technology in stand-alone rack and tower servers largely because FCoE does not operate over a large, multi-vendor, multi-system

Note that the numbers above underestim ated the 3Q10 FCoE adapter port shipments from Brocade (actual was 2,350 ports we estimated 800) and do not include Cisco's FCoE adapter named VIC for its UCS (which we estimate to be between 10,000 and 20,000 ports).

FC and FCoE SAN Adapters As can be seen in the figure above, during 3Q10 FCoE adapters and LOM climbed to 17% of the overall SAN Adapter market port shipments, and 7% of revenues ($12 M of FCoE revenue and $168 M of FC). FC adapter port shipments rose 4% Q/Q, lifting revenues 2% Q/Q. Including FCoE, port shipments rose 18% Q/Q lifting revenues 2% Q/Q. The bulk of the increase came from FCoE LOM which is approximately $25 per port, about one-tenth the price of an FC stand-alone adapter port. Emulex achieved volume shipments (128 K ports) of its FCoE LOM to HP and the LOM are shipping with the FCoE enabled. Note that it is common in the industry for products to be capable of supporting features, but to enable those features the user must purchase an additional software license. In this example with Emulexs FCoE LOM, HP has purchased the software license to enable
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Overview (Cont.) the FCoE packet handling. While FC sales rose modestly for both Emulex and QLogic, FCoE sales were mixed. FCoE adapter sales for both companies were down Q/Q, while the FCoE LOM bolstered Emulex. We attribute QLogics softness to product overhang as its reseller channel partners waited for its new generation multitechnology product. During the first week of October, QLogic announced one of its most significant product advances evera series of 10 Gbps controllers and adapters that can support Ethernet, FCoE, and iSCSI concurrently. Note that FCoE adapters cannot support FC as there are many differences between the two protocols (e.g., the cabling, the signaling, and the speed of traffic). The FCoE traffic would be repacketized and converted into either FC or Ethernet at the FCoE switch. Intels FCoE solution is different from Brocades, Ciscos, Emulexs, and QLogics in that the FCoE packet handling is performed in software on the operating system, using the server processor rather than the processor on the adapter card. All of Intels 10 Gbps Ethernet controllers and adapters are capable of supporting FCoE. Intels products are currently being tested and qualified by EMC for both Ethernet and FCoE, and they have already been qualified by NetApp. Also during the quarter, but subsequent to our publishing the HBA Vendor Tables, Brocade announced that it shipped FCoE adapters to Dell, and that in 4Q10 IBM will begin selling Brocades FCoE switch and adapter in its BladeCenter servers. We estimate Brocades 3Q10 FCoE adapter port shipments to be almost 2.5 K. Cisco announced that its UCS system achieved a $500 M annual run-rate during its fiscal quarter ending October 30, 2010 ($125 M for the quarter), and that it has 2,800 UCS customers, up from 1,700 in the prior quarter. We are working with the company to estimate the volume of its highly specialized FCoE mezzanine adapters which began shipping in February, 2010. During 3Q10 Cisco launched its stand-alone FCoE adapter. These adapters support 128 virtual channels which can be allocated to either of the two ports; that is, as low as one channel on one port and 127 channels on the other, or any combination in between. There is enormous change and many technical advances occurring in the controller and adapter market, which will pave the way for change in

Overview (Cont.) networking overall. Scientists at the manufacturers are innovating and bringing to market products that support ever-increasing variety of protocols, at faster and faster rates of communication. Previously, these products supported only one, or a very limited number of protocols. During 2011, the rate at which users embrace these new products will unfold, and we will adjust our outlook accordingly.

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Definitions Fibre Channel Fibre Channel is a standard that was formalized by the American National Standards Institute (ANSI). It is currently the primary technology used to connect SAN Switches to other devices in a SAN. It is important to note that Fibre Channel is not limited to use in SANs, nor are SANs limited to using Fibre Channel. Other interconnect technologies, such as FCoE, may ship on SAN Switches in the future. SAN Switch SAN Switch is an abbreviation for Storage Area Network Switch. A Storage Area Network (SAN) is a network designed specifically for communication between storage devicessuch as tape libraries, Redundant Array of Independent Disks (RAID) and Just a Bunch Of Disks (JBOD)and hostssuch as servers, mini-computers and mainframes. A switch is a Layer 2 device (OSI data link level) that filters and forwards frames and/or packets. SAN Switch Modular These devices are chassis-based products. Because they are typically deployed in the core of a storage area network, they are designed to provide high availability and to minimize downtime. Some features typical of products in this category include: - Redundant power supplies - Redundant fans or cooling systems - Redundant control modules - Hot swappable control modules - Hot swappable line modules This category includes, but is not limited to, devices commonly called Directors. Directors have additional high-availability features, such as nondisruptive code loads. SAN Switch Fixed This category includes products that have relatively limited flexibility. Some examples are Brocades SilkWorm 3850, Ciscos 9100, McDATAs Sphereon 4400, and QLogicss SANbox 3000. They generally have a fixed number of ports (e.g., 8 or 16), but sometimes have an add-on module. We include Blade Switches (e.g., Brocades or QLogics Blade Switch sold in conjunction with IBMs eServer BladeCenter, or HPs BladeSystem) in the SAN Switch Fixed category. These switches are also referred to as Embedded switches.

Definitions (Cont.) Host Bus Adapter Host Bus Adapters are typically deployed in servers and manage the transfer of data between a servers bus and a Storage Area Network. HBAs perform a function in the SAN similar to that which Network Interface Cards (NICs) perform in the LAN, but there are some differences between HBAs and NICs. For example, HBAs have the ability to offload some processing requirements from the servers Central Processing Unit (CPU). HBA products are available in two forms: - stand-alone adapter cards - mezzanine adapter cards Stand-alone adapter cards are designed and optimized for use in traditional servers. Mezzanine cards (commonly referred to as embedded or extension cards), are used in conjunction with a blade server and provide the same function that a stand alone HBA provides for a traditional server. It is an I/O expansion card used to connect a blade server to a SAN, but utilizes a different form factor. Typically this is achieved by having the ports on the expansion or mezzanine card connect directly to the server blade, which communicates via the server enclosures backplane. In turn, the enclosure utilizes a Fibre Channel switch module or pass-through module to connect to a SAN. In some systems, the mezzanine HBA may have ports that enable a direct connection to a SAN.

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Vendor Product Maps SAN Switch Modular Brocade 12000, 24000, 48000, DCX Cisco MDS 9500 Maranti CoreSTOR MaXXan MXV250, MXV500 McDATA/CNT/Inrange 6064, 6140, ED-5000 Director, UltraNet Multiservice Director (UMD), FC-9000 Director, Intrepid 10000 Sandial Shadow 14000 QLogic SANbox2-64, 9000 SAN Switch Fixed Broadcom/Gadzoox Slingshot 4210, 4218, -ES Brocade 200E, 300, 2200, 3000, 4000, 5000, 6400, 7000 series, Multiprotocol SAN Router, Blade Switch Cisco MDS 9200, 9100, 9000 series, 5428 Storage Router, MDS FC Blade Switch Emulex/Vixel 9100, 9200, 9300-HA, 7100, 7200, 355, 375 McDATA Sphereon 4700, 4500, 4400, 4300, 3200, 3000 series, Eclipse SAN Router QLogic SANbox -8, -16, SANbox2 -8, -16, 8,000, 6000, 5000 3,000 Series, Express 1400, Blade Switch Host Bus Adapter Agilent HHBA-5100, 5200, 5400 AMCC/JNI FCX, FCC, FCE, Z200 ATTO Celerity FC and ExpressPCI series Brocade 400, 800 series Emulex LP and LPe 101, 8000, 800, 9000, 900, 10000, 1000, 11000, 1100, 12000, 1200, various blade server HBAs HP A6684A, A6685A, A6795A, A6826A Interphase PowerSAN 4500, 5000, 6000 LSI Logic LSI4000, LSI7000 series QLogic 200, 2200, 2300, 2400, 2500 series, various blade server HBAs

Methodology The Dell'Oro Group reports are based on shipments from manufacturers docks. We report revenue and pricing in manufacturer's sales, rather than end-user sales. Reselling by other vendors is not addressed in order to eliminate double counting. Additionally, we do not adjust for fluctuations in channel inventory. The DellOro Group surveys vendors on a quarterly basis. Data from the largest vendors is entered into business models that compare unit and port shipments with publicly reported revenue. Pricing is then checked against models of product configurations with the latest industry trends to ensure that the relationships between units, revenue, and pricing correspond. Data in DellOro Group reports is reconciled to publicly reported revenue. Unit volumes correspond to these reported dollar values and therefore may differ from gross shipments which may include demo units, beta systems, and units subject to customer acceptance. Data in our reports reflects activity for calendar quarters. We reconcile data in accordance with the vendors fiscal quarter that best matches the calendar quarter. As applicable, once the data is reconciled it is adjusted for and reported in terms of the calendar quarter. For example, first quarter data in our reports for Brocade reconciles shipments, pricing and revenues for their fiscal quarter February, March and April; once the data is reconciled, it is adjusted for and reported in terms of the calendar quarter ending March. Tracking the manufacturers in accordance with their fiscal quarters allows us to check the survey data with quarterly reported financial information while calculating market size and vendor share on consistent periods.

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