The Channel logo


By | Drew Cullen 22nd July 2008 06:55

Brocade buys Foundry Networks for $3bn

Playing with the big boys now

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”.

Brocade release ®

comment icon Read 2 comments on this article alert Send corrections


Frank Jennings

What do you do? Use manual typwriters or live in a Scottish croft? Our man advises
A rusty petrol pump at an abandoned gas station. Pic by Silvia B. Jakiello via shutterstock

Trevor Pott

Among other things, Active Directory needs an overhaul
Baby looks taken aback/shocked/affronted. Photo by Shutterstock

Kat Hall

Plans for 2 million FTTP connections in next four years 'not enough'
Microsoft CEO Satya Nadella


League of gentlemen poster - Tubbs and Edward at the local shop. Copyright BBC
One reselling man tells his tale of woe