Sun Microsystems Inc is to bundle Ancor Communications Inc’s eight-port GigaWorks Fibre Channel switch with its StorEdge arrays. To secure the deal Sun has a warrant to buy up to 1.5 million Ancor shares at $7.30 per share for each $67 of revenue Ancor receives, worth $10.95m investment in total if Ancor gets $100.5m of orders from Sun. Sun wouldn’t comment on pricing details, but Ancor shares rose 37% on the news last Thursday to reach $14.62.
Ancor has 24.1 million shares outstanding, its market capitalization is $343.4m at Thursday’s price. Sun says the deal isn’t exclusive but it is a blow to Ancor rival Brocade Communications which claims to own 85% of the market for Fibre Channel switches with its 32-port SilkWorm device. Ironically Brocade was co-founded by VP engineering Paul Bonderson, formally with Sun and is also backed by Sun founders Bill Joy and Andy Bechtolsheim. Sun’s storage revenue is reportedly rising at a rate of 45%, with storage claimed to currently account for 50% or more of every system sale.
