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Fibre Channel and Ethernet networking company Brocade may be shopping itself around again, the The Wall Street Journal reports – again.

Two years after reporting that Brocade had hired investment banker Qatalyst to find a buyer, the WSJ is at it again. According to people familiar with the matter, Brocade is up for sale, with Qatalyst hawking it around the industry – again.

Why? We know there's an activist investor, Elliot Associates, with an 8.5 per cent stake in the company, nibbling at Brocade's heels and, although its Fibre Channel business is steady, it is not making giant steps in the Ethernet market.

The potential buyers list has dwindled. Since 2009, Dell has bought Force 10 and Cisco has hobbled itself with consumer IT products like Flip, that diverted its energies from its core networking business and caused divestments and retrenchment. Juniper is looking stronger though, and Arista has carved out a low-latency switch networking business.

Brocade's problem is that it is two years on and Fibre Channel, its bread and butter legacy business, is not exciting but stable. Its Ethernet business is a small section in a vast market that has lots of competition. Where is the growth going to come from? It's has a nicely developed cloud strategy but so have other, much larger companies and, to be harsh, Brocade's cloud strategy is not that different from any other good supplier's: competent for sure but not industry-leading.

Its recent earnings history has not been stellar, with lower than hoped-for third quarter profits of just $1.9m reported in August.

AP's inquiries about whether or not the company will put itself up for sale have not been responded to. El Reg put the same question to Brocade's Stuart Marks, EMEA PR and analyst relations manager. He said: "We do not comment on speculation or rumour."

The usual suspects

So, against that background, we put our thinking caps on and thought of the usual suspects: Oracle, HP maybe to bulk up ProCurve, Cisco to take out a competitor, Broadcom to widen its business. Hitachi Data Systems to get into the networking business faster than by relying on Japanese parent Hitachi's networking gear, EMC to – no, forget that one, it's left field.

In general, server companies that want to get into networking could think buying Brocade is worthwhile but IBM already has BNT, Dell Force 10, and HP ProCurve. Which other server company is left? Exactly: no one. The existing ones might think they could bulk up their existing networking offer by adding in Brocade but ... er ... where's the growth glamour in Brocade's offerings? Arista looks sexier from that point of view.

Also, could they be certain that they could keep Brocade's OEM business deals intact? They might find those deals collapse and Brocade's business deflates like a punctured balloon.

It's networking, stupid

So this logic leads us to think it looks like a networking company wanting to force consolidation and strengthen itself against Cisco is the likeliest buyer, if the people familiar with the matter that the WSJ has been talking to, that is, are not off their trolleys.

The last option is a private equity concern like Silver Lake. But what would it do with Brocade: separate the Fibre Channel and Ethernet business? Kill of FCoE? Sell it to someone else? It's not easy to see how a private equity form could restructure Brocade to turn it back into a high-growth business.

El Reg's take on this is that there are too many Ethernet networking suppliers, none of which are counterweights to Cisco, and none of which, except possibly Arista, have exceptional technology. Consolidation is needed. Brocade, if it is for sale, looks best suited to be a substantial filler in some other networking supplier's product sandwich.

Hello Juniper... ®

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