How Brocade CEO Lloyd Carney Energized a Tired Company

by Chris Preimesberger

NEWS ANALYSIS: During Carney’s 17 months on the job, the company has increased its profit margins and built its market cap up to $4.05 billion.

Brocade Communications Systems has a tidy and highly profitable $2.3 billion Fibre Channel and Ethernet fabric business. It also has doubled its stock price from $5.25 to nearly $10 in the last 12 months. However, it also has been chasing data networking market share leader Cisco Systems for longer than it cares to remember--which is more than a decade.

Ostensibly, it’s new CEO Lloyd Carney’s job to either close that gap and grow the business, or else to wrap up the company and sell it for the highest price possible. But if you sit down and talk with Carney, a personable 52-year-old native of Kingston, Jamaica, you don’t get the notion at all that he’s interested in selling, even though that’s exactly what he has done with his last two companies--virtual I/O provider Xsigo to Oracle in 2012 and Micromuse to IBM in 2006. That being said, if the right offer were to come along, and the board of directors and stockholders in the company were to agree, then a sale certainly could happen; it could to any company.

During Carney’s 17 months on the job, the 19-year-old company has increased its profit margins and built its market cap up to $4.05 billion--from $2.54 billion at the end of 2012. The numbers have improved steadily as Carney has focused the company on larger enterprise customers and rolled out new software-defined networking and storage systems for users in 160 countries.

Software-Defined Networking and Storage

SDN and SDS is infrastructure that is managed and automated by intelligent software as opposed to the hardware itself. The concept underlying this is to offer customers a way to retain the value of the current storage infrastructure while building out storage capabilities that reflect the developing cloud storage models without having to abandon previous storage investments.

Brocade has been investing in its VDX line of network switches and last year rolled out a new 24-port, 10-Gigabit Ethernet module for its MLXe series of routers designed specifically for software-defined network environments. Carney says they have gained good traction.

Not that long ago, Brocade was trying to define itself at a time when competitors such as Cisco Systems and Juniper Networks were reinventing themselves and moving into new markets. Brocade lost ground in the sales wars by sticking with selling its older Fibre Channel and Ethernet storage networking products and not adding anything new until it bought SDN provider Vyatta in late 2012.

Including his years running Xsigo and Micromuse, Carney has 30 years of experience in the IT business, including time as COO at Juniper Networks and at Nortel Networks as president of its multibillion-dollar Core IP, Wireless Internet and the Enterprise divisions. He also was an executive vice president at Bay Networks.

eWEEK sat down with Carney to get his take on the prospects for the company for the second half of 2014 and beyond.

Q: How does Brocade plan to grow its marketshare against companies such as Cisco Systems, Juniper Networks and Hewlett-Packard?

A: The trend in networking right now is software-based networking. If you think about what’s been happening in the networking space in the last 20 years, there hasn’t been much innovation. Think about the cellphone you’re holding and the compute capability in that phone, how it has advanced for the last 20 years. Then go into a data center; it looks pretty much as it did 20 years ago. Top-rack switches, same infrastructure--no innovation. The network right now is the limiting  factor in data center innovation.

Think about what you’re able to get for servers, server density--we have customers getting 100 virtual machines per server. One pizza-box-size server looks like 100 machines. Think about what you get for cost benefits on storage: What are you paying per gigabyte for storage for your camera at home versus what you paid two or three years ago? Exponentially less! Yet in the data center, you pull a cable and you’re lucky you have 10 percent utilization. The average is 5 to 10 percent utilization. Go ask any IT director--it’s that low. Where else do you give someone a dollar, get five cents back, and say ‘That’s a great deal!’  

“So that’s changing dramatically, and we’re helping drive that change. That change is happening because of software. You can now run software on top of standard x86 platforms; it’s more cost-effective, and they have the performance. So we’re taking on all comers in the emerging space.  

Q: What are the key messages to the market for Brocade?

A: There are three key messages. No. 1: We are storage experts. People tend to see us as Fibre Channel experts. We are also Ethernet experts. People are talking about the hot, sexy new SSD arrays they’re coming out with--90-plus percent of them are connected to Fibre Channel. We are storage experts.

No.2: We’re No. 2 and growing fast in data centers around the world. IDC said that in the market segment of people who make technical decisions and not brand decisions, our main competitor is 31 percent, we’re 29 percent. Globally, they’re 40 percent, we’re 18-19 percent.

Last but not least, we’re going to take the hill in SDN. Our focus is on the data center, and in the data center there’s going to be more software-based networks, and we’re going to drive that.

Q: Brocade is smaller but more agile than its chief competitor, Cisco Systems. How are you using that to your advantage?

A: Customers come to us for solutions. We’re able to listen and respond to requirements. We had a major bank come in here and talk to us about an open, more agile solution. They were specific about wanting to use HP servers and EMC storage. They didn’t want to use end-to-end Cisco networking and storage. They called us on a Friday and wanted to come in on Tuesday. By the time they showed up on Tuesday, we had HP servers, our networking and EMC storage all set up, so they could actually see and test their applications running on what they talked about.

“The customer said: ‘Cisco couldn’t have done this.’ First of all, they’d be trying to sell their own servers, not HP servers; they wouldn’t have tried to promote someone else’s storage; they’d have said ‘Here’s our stack, use our stack.’ So we’re more agile, and we partner with everyone else in the industry. It’s not by accident that with every compute vendor, you can buy solutions from Brocade. Every major storage vendor--HP, Dell, IBM, Hitachi, Fujitsu. IBM gives us mainframes. I have more than $1 billion in test equipment.

Q: What’s the sense of value you have for the tech media, publications like eWEEK and others, and what they provide for the IT industry?

A: Here’s a trend: Seventy percent of our customers, before they meet with one of my sales execs, they have already made a buying decision. And they do it by going and reading things that you write. Seventy percent! Think about buying a car; you don’t just show up on the lot and say, ‘Hey, tell me about that car.’ You show up, and you know more than the sales guy does about that car. The same thing is happening in this industry. Our consumers are very educated, they’re smart. They want to go read your magazine [Website] to find the comparisons to what they’re looking for, and when we show up, they already know all about us.

In short, it’s [education through IT trade media] huge. It’s a significant factor. And it’s not something we put enough emphasis behind (previously). We didn’t look to influence the customer before he showed up. You know, a lot of times I’ll show up for a customer, and they don’t even know that we have an Ethernet fabric. They know we have a SAN fabric. There’s an education process that plays a huge role in the buying process, so thanks for what you do!


Headquartered in San Jose, Calif., Brocade has about 4,000 employees worldwide and serves a wide range of industries and customers in more than 160 countries.

This article was originally published on Tuesday Jun 3rd 2014