Exclusive Interview With Brocade CEO Mike Klayko

"There's no relationship between what we're doing and the value of the company."
By Jean Jacques Maleval on 2010.12.02

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brocadeklayko Michael Klayko, 56, was named CEO of Brocade Communications Systems and a member of the board in January 2005, succeeding Greg Reyes. He has more than 30 years of experience in the storage, computer, and telecommunications industries. Previously he was VP of WW sales at Brocade and also served as the VP of marketing and support and VP of OEM sales. He joined Brocade in January 2003, following the acquisition of Rhapsody Networks for $175 million, where he served as CEO and president. Prior to that, he was executive VP at McData, bought by Brocade in 2006 for $713 million. He also held positions at EMC, HP, and IBM after beginning his career at Docutel and TRW. Klayko currently serves on the boards of the Silicon Valley Leadership Group and The Tech Museum of Innovation. He has a BS in Electrical Engineering from the Ohio Institute of Technology.

StorageNewsletter: Would you say that Brocade is mainly an FC or Ethernet company nowadays?

Klayko: I think today, Brocade’s a networking company. And Fibre Channel and Ethernet are both technologies that we provide to the market, but for the most part, we provide networking, and we are broader than either one of those, to give you an indication, look at the announcement we made around our new Ethernet fabric architecture, which is a combination of both.

For your last financial quarter ended July 31 your storage revenues represented 58% of your total sales, and Ethernet 24%. When do you see Ethernet revenues surpassing storage?
The market will decide when both revenues will be equal or larger. But when you look at the market place, the Ethernet market is much larger in terms of the storage area networking market, and so you will see us grow that side of the business much faster than our storage side.

Which year?
We have an internal plan that shows when both are equal sized, and when one becomes larger. In the future. Right now the Fibre Channel business continues to grow quite well.

For connectivity products, one of the main problems for users is cables. Do you see a solution?
There’s too many? Well, I think there are a couple of things that we’re solving. First and foremost, this new technology that we announced and some of our new converged network adapters virtualizes many of the connections, we can eliminate many of the cables just by new technology around our new adapters. The other reason you’ll see simplification is some of the new top-of-rack products – switches – so you’ll see cabling that is denser in terms of higher speeds and top-of-rack will simplify cable requirements also.

What's your recommendation to storage customers, 16Gb FC or 10GbE?

For the storage customer, I think what will happen is that it will be focused on 16Gb Fibre Channel, I do, just because Fibre Channel is the de facto standard for connecting storage around the world. Most of our customers, in fact, from quarter preceding the last, we shipped 94% 8Gb already and a lot of it is driven by virtualization. We’ll see 16Gb become very popular.

FCoE is supposed to convert customers from FC to Ethernet, no?
No. It’s a way. We’ve always said that we didn’t believe FCoE in the storage side would be mainstream until 2012, and so we still see more Fibre Channel implementations on the storage side.

How many deployments of FcoE have you done?
It depends on how you count it, but it’s a very small percentage of my revenue, less than 5%. A lot of the FCoE has been top-of-rack, where it splits then to Fibre Channel or to Ethernet, but not pure FCoE at this point.

Do you believe in Infiniband, given you have no offering currently?
I don’t believe Infiniband is a long-term architecture. Because the benefits you’re going to get with high speed 10Gb Ethernet is going to replace Infiniband. I think it’s a very niche product, it only focuses on server connectivity and does not do a very good job in the storage connectivity.

We see a lot in HPC.
That’s all you see it in. That market is only $400 million. The Ethernet market is $35 billion.

Do you have any plans for low-end connection products for home or small SMBs?
Not for home, not my market. What we’ll see is this Ethernet fabric is an excellent building block for small businesses, they can do a small number of servers, iSCSI storage, our building blocks and put virtualization, they can build their own cloud for very little cost. That’s what you’ll see us focus on.

There have been rumors about an acquisition of Brocade. But for me, the value of your company is somewhat low because the only potential buyers are your OEMs, like Dell, EMC, HP, IBM and therefore any acquirer would lose all the other OEMs. And then with Cisco, there is a risk of antitrust action, given the two companies are alone in directors. What's your reaction to this comment?
My reaction is everybody’s trying to build their own complete vertical stack, a lot in response to what Cisco did by entering the server business. My reaction is I love the position I’m in today. The fact that I’m an independent company that works with best of breed server and storage technologies, we just created a brand new category of product, it took us three years to go ahead and build it, the customer acceptance of our product is overwhelmingly good.

Your answer is that you like being independent?
I don’t like it, I love it. I love being independent.

But you haven't said anything about the value of your company.
I think there’s no relationship between what we’re doing and the value of the company. I believe over time as the company continues to grow, gains market share, enters new categories, the value will get taken care of by itself.

You took over for Greg Reyes. What's the latest news on him?
Probably the same information you have. I haven’t heard from Greg in a long time. We actually parted ways from a standpoint of legal responsibility more than three years ago. Personally I feel very bad for the man, professionally I’ve had not interaction with him for a long period of time.

Is he currently in jail?
Yes he is, for 15 months. I look at it this way – it’s a chapter that’s behind us, and now the new chapter in front of us is the company we’ve built.

He certainly wasn’t the only CEO to do what he did [post-dating stock options –Ed.].
There were quite a few.