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Brocade sale rumours bursting out

All over the street

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Based on a Reuters report, rumours of Brocade shopping itself to private equity buyers are pouring onto the net.

Brocade is the dominant supplier of Fibre Channel SAN switches and directors, and also has an Ethernet switch business through buying Foundry Networks. It is struggling to grow fast and make consistent profits.

A sale has been thought likely, either to a bigger networking supplier looking to consolidate networking suppliers, or to a private equity concern which could refashion the business. It was speculated that Dell looked at Brocade, but rejected it before it bought the Force 10 networking business in June, 2011.

Brocade is well ahead of rival Cisco with 16Gbit/s Fibre Channel technology and produced good quarterly results last November impressing analysts, even though it made a loss.

Frank Quattrone's investment banking outfit Qatalyst Partners had been hired in November 2011 by Brocade, and first round bids for Brocade have now been received. The Wall Street Cheat Sheet reports half a dozen private equity buyers have been involved.

Brocade's market capitalisation is around $2.7bn so any bidder will be willing to spend that sort of cash, or more if a bidding war develops. ®

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