History (1999): More on Hub Maker Gadzook Networks

A company prepares for an IPO, as is the case now with Gadzoox Networks, which hopes to raise $50 million, then it is obliged to “bare” itself, that is to say, to give detailed information about its business activities, something it was not required to do as a privately-held company.

Fortunately, this provides us with an ideal opportunity to know a little more about this provider of SAN products, basically active and managed hubs, managed area and chassis switches, and of course, managemet software.

Gadzoox was founded in April 1992 by its current CTO, Dr. Alistair Black among others, and initially developed electronic test equipment.

Since October 1995, it has focused on FC network products that address the SAN market.

Even if the company has an accumulated deficit of $29 million, it is in a market that is currently in total expansion, but with more and more competition (including Ancor, Brocade, Emulex and Vixel).

Furthermore, its backlog as of March 31, 1999, was $4.1 million.

Gadzoox already boasts prestigious OEM customers, but in the end, they are too few and far between. In FY99, Hewlett-Packard represented 42% of its revenues, Compaq 15%. Then there is Avid, Bull, Data General, Hitachi, Fujitsu, MTI, NEC, etc.

The company has also established strategic relationships with firms such as ATL, Compaq, EMC, EB, Legato, Microsoft, Seagate, Sun and Veritas.

Recently, Gadzoox has set up a network of distributors (Bell Microproducts, Ideal Hardware, Tokyo Electron, Itochu) and resellers (Agate Technology, Andataco, Merisel).

The only dark cloud on an otherwise clear horizon was the recent cancellation, by Digital Equipment, of its July 1998 orders for the company’s Bitstrip hubs, and, in December 1998, HP’s reduced orders for Gibraltar 10-port products. Gibraltar products represented 75% of the company’s sales in fiscal 1999, compared to 16% for its Bitstrip hubs. The first switches, brandnamed Capellix, will not be on the market before the third calendar quarter of 1999.

All Gadzoox’ products originate with a third-party manufacturer, Sanmina, in Santa Clara, CA.

Last September, the firm entered into a $15 million convertible note agreement with Seagate Technology, which holds 20% of Gadzoox common stock, not forgetting that Seagate’s CEO, Steve Luczo, occupies a seat on the company’s board. Not surprisingly, Gadzoox’ president and CEO, Bill Sickler, is a Seagate veteran, a former executive director of software development from 1995 to 1996. The company has 149 employees, 66 in R&D alone.

This article is an abstract of news published on issue 137 on June 1999 from the former paper version of Computer Data Storage Newsletter.