Brocade buys Foundry Networks for $3bn
Playing with the big boys now
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Brocade is to acquire Foundry Networks for $3bn in cash and stock. The storage networking vendor has secured a $1.5bn debt facility from Bank of America and Morgan Stanley to grease the purchase.
The company says the acquisition will be accretive to Brocade's non GAAP earnings in fiscal 2009. In other words, there are cost savings to be made. Also, Foundry is a more profitable company. Last year it posted $607.2m sales and $81.1m income. Brocade, about twice the size with $1.2bn in revenue, produced profits of $76.9m.
That's the financials out of the way: so why is Brocade willing to take on so much debt to get Foundry? Cisco, in a word. The world is going data centre-crazy and right now, only Cisco can supply all the data networking equipment that these power-guzzling factories need.
With Foundry under its belt, Brocade thinks it can also play credibly end-to-end. In interviews yesterday. Marty Lans, a Brocade marketing veep, said Foundry brought Ethernet products to its table.
So the companies have the technology to take on Cisco. But they have an awful long way to go to match them on sales. Foundry took two per cent of the market for Ethernet switches in 2007, against Cisco’s 71 per cent.
So the Brocade-Foundry tie-up looks defensive as much as anything else. As Dell-Oro analyst Alan Weckel told AP, Cisco has “been advocating that the Fibre Channel and Ethernet technologies themselves should be merged somewhat - a direct assault on the core business of Brocade and Foundry Networks”.
COMMENTS
For and against
As much as I love the fact that Cisco SAN doesn't sell too well, due to Cisco being a *network* (read ethernetwork) company, I hate to see Brocade going in the same miserable direction.
Cisco knows how to do ether, Brocade knows how to do SAN. Why not make a Joint Venture between Brocade and Cisco. Cisco dishes it's sickling SAN stuff, Brocade dishes the LAN/WAN stuff. And the Joint Venture does the Data Centre Network technology based on 10Gbps, getting LAN/WAN knowledge from Cisco, SAN and Core manufacturing knowledge from Brocade?
That would create one hell of a company, if only joshua judd would lead the technical side of it :D
Paris, because she knows how to plug a hole.
Merged schmerged!
All this "merged SAN and LAN" just sounds like a very expensive version of iSCSI, which doesn't seem to have taken over the market like the vendors were screaming it would. I like having LAN and SAN separate, and we have some SAN bottlenecks where we're gagging for 8Gb - I'd not want to have to lump those bottlenecks onto a "merged Ethernet" where it will have to compete with LAN traffic for bandwidth. I can't help thinking this merged mumbo-jumbo is just CISCO trying to beat out Brocade by turning the SAN discussion into a LAN one.
In the meantime - go Brocade! If they can make network switches as well as they make SAN ones I'll be taking a look at them.
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