IBM has agreed to purchase privately held Blade Network Technologies in a transaction expected to close before the end of the year under undisclosed financial terms. With the move, IBM hopes to capitalize on high growth in the blade-server market with the world's second-largest switching vendor for data-center network deployments.
Blade Network Technologies is expected to help IBM better integrate its systems in corporate networks by optimizing them for workloads that require high-speed and low-latency performance, such as cloud computing and business analytics, noted Brian Truskowski, general manager of IBM System Storage and Networking.
"For example, faster data transport enables faster decisions important for analytics workloads," Truskowski said. "Blade will increase IBM's system networking development, sales, support, skills and awareness and help IBM build smarter systems that are optimized for client requirements."
IBM's Strong Blade Growth
During the June-ending quarter, revenue in the blade-server market rose nearly 31 percent year over year to $1.5 billion, according to IDC. Blade servers are popular purchases because they can help larger organizations optimize their IT environments to keep pace with ever-changing business demands, noted IDC Research Manager Jed Scaramella.
"Blades accounted for the largest portion of total server revenue since the form factor came to market," Scaramella said. "As vendors continue to build out their blade offerings through enhanced virtualization, management and I/O capabilities, customers are leveraging these technologies as part of converged systems that are a building block to future internal cloud infrastructures."
The switches and software that Blade Network and its rivals produce are designed to connect new data-center products to the network. According to Blade Network CEO Vikram Mehta in a recent blog, the switch maker expects to surpass 10 million data-center ports in production deployment before Christmas.
For IBM, the blade-server market is one of the sweet spots where the industry giant has been gaining market share. According to IBM CFO Mark Loughridge, the company's System x revenue in the second quarter grew 30 percent year over year, led by the company's high-volume blade offerings based on x86 CPUs, which rose 16 percent. Moreover, the company's POWER Blade segment grew more than 65 percent.
"We have now won 620 deals from Sun Microsystems, totaling nearly $650 million over the last six quarters," Loughridge told investors in July. Sun was acquired by Oracle in January.
Going After HP
Despite making strong gains in the blade market in the first half of this year, IBM came in second in the global server market overall with a 24.2 percent share at the end of June -- well behind rival Hewlett-Packard's 55.8 percent share. HP was also the market leader in the blade switch segment during the quarter, according to the Dell'Oro Group.
Blade Network already serves more than half the companies on the Fortune 500 across the financial services, automotive, telecom services, education, government, health-care, and defense industries. So putting Big Blue's global marketing machine directly behind Blade Network products makes competitive sense as significant network upgrades are happening in the data center.
"Customers are migrating servers from multiple 1,000-Mbps connections to two 10GE connections" and features such as the ability "to combine Ethernet and fiber channel are becoming standards in data-center designs," said Dell'Oro Group Research Director Alan Weckel. "When combined with vendor competition," this "will lead to significant market transitions."