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Survey: Cisco must earn storage stripes

A survey says that although the networking giant now has technology foundation to build its storage business, much work still remains to be done.

Networking giant Cisco Systems' new ventures in the storage market have piqued the interest of IT buyers, but the company may have to "earn its stripes," according to a new survey.

CIOs gave Cisco only around a 5.7 out of 10 chance of success in the storage switch market, according to a Merrill Lynch survey of 100 chief information officers in the United States and Europe.

In August, Cisco announced plans to acquire privately held Andiamo Systems, which makes SAN (storage area networking ) products. That market was seen by analysts as a key growth area for Cisco, allowing it to stay competitive with companies such as Brocade Communications and EMC.

In the Merrill Lynch survey, about half of CIOs said they would prefer to buy switches directly from Cisco, as opposed to having companies such as EMC or IBM integrate the switches.

But the Merrill analysts said they doubted that would be possible right away.

"EMC seems to want switch competition in order to lower prices and accelerate SAN adoption," analyst John Roy wrote. "EMC does not want, however, to lose its accounts control by having Cisco sell directly and perhaps even forward-integrate into storage."

But other analysts think Cisco's new products, which include the potential to support 768 ports in a single rack enclosure, may give EMC some formidable competition.

"By introducing the most complete product line in the SAN switch business it is making a statement that it intends to take the business very seriously," wrote US Piper Jaffray analyst Ashok Kumar in a report. "There is still a great deal Cisco needs to do in order to succeed, but its new product line establishes the technology foundation to build its business."

The overall market storage market has been tepid, as companies continue to watch spending carefully in tough economic times. The CIOs surveyed by Merrill Lynch said they expect to increase their spending on storage products by about 5 percent this year.

Meanwhile, overall spending may drop from 2001. Thirty-three percent of respondents said they expect to spend more in 2002 than in 2001, while 38 percent said their budgets would be lower.

Our sense is that CIOs underspent their budgets throughout the year," Merrill analyst Steve Milunovich wrote.