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February 9, 1999


By CBR Staff Writer

EMC Corp is reportedly looking to take its McData storage networking company public, possibly by the end of this year, although EMC says that the timescale is not set in stone. According to Wall Street brokerages briefed by McData executives including Merrill Lynch & Co, EMC thinks that the SAN storage area network is going to start becoming real this year and McData, which is a high-end storage network supplier, should be able to ride on its coat tails. McData is supposedly preparing to fatten up its value proposition by announcing new OEM, distribution and systems integration deals. EMC claimed not to know about these deals but admitted that a McData IPO would be tied to the speed at which the SAN market grows. In taking McData public, EMC would be fulfilling a plan it laid out around 18 months ago when it gave the high-end storage networking company a degree of independence by giving it a separate board of directors. EMC splashed out $234m for the company in December 1995 and currently owns 80% of it. EMC hopes to sell the fibre channel devices that support networks of storage devices that will replace traditional single path server-to-storage architecture. The McData storage directors can reportedly be used to pass traffic between servers and storage devices. IBM OEMs McData’s Escon switches which connect mainframes to storage. Merrill Lynch says McData’s revenue stream is currently tracking mainframe sales. Revenue was down 7% in 1997, following an 8% decline in IBM mainframe revenue. However long term McData will replace mainframe revenue from sales of fibre channel switches and SAN kit. The brokerage is predicting McData revenues of $198m in 1999, up 11%. EMC has inked March 1 as the day it will unveil its latest storage offerings. It is also expected to shed some light on plans for a fibre channel switch, technology McData is currently supposed to be working on.

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