infoTECH Feature

July 22, 2008

Brocade Acquires Foundry

Brocade is purchasing Foundry Networks (News - Alert) in a deal valued at roughly $3 billion.
 
Under the agreement, Brocade will pay a combination of $18.50 of cash plus 0.0907 shares of Brocade (News - Alert) common stock in exchange for each share of Foundry common stock. The acquisition is expected to close in the fourth quarter of calendar year 2008.
 
Commenting on the acquisition, Yankee Group (News - Alert) senior vice president Global Enterprise Research, Zeus Kerravala said, “Through this deal, Brocade has now uniquely positioned itself in the networking industry to deliver a leading, alternative solutions portfolio spanning local, metro, wide and storage area networks.”
 
“The breadth and depth of this portfolio make Brocade a viable option for customers looking for complete networking solutions capable of addressing their constantly evolving and increasingly complex IT challenges,” he added
 
According to the Brocade Web site, as the two companies join forces, “networking customers around the world will get a true, high-performance provider who can deliver cutting-edge solutions that extend from the edges of the Internet to the heart of the data center.”
 
They believe the combination of Brocade’s market leading position in data storage networking with Foundry’s innovative networking talents will position them to better serve their customers as they demand higher performance converged solutions.
 
Brocade hopes to be able to more effectively compete with much larger rival Cisco (News - Alert) Systems, or at any rate they will be able to lay claim to a larger piece of the router market with the Foundry acquisition.
 
The Associated Press is quoting Dell’Oro Group statistics that show that Foundry owned just two percent of the market for Ethernet switches in 2007, compared to Cisco’s 71 percent. Furthermore, the combined valuation of the newly merged entity is roughly $5 billion compared to Cisco’s $129 billion market cap.
 
Foundry brings a slew of loyal customers, including government and large enterprise buyers to the relationship.
 
Foundry also announced financial results for its second quarter yesterday.
 
Foundry’s revenue for the second quarter of 2008 was $160.7 million, compared to $143.2 million in the second quarter of 2007, and compared to $150.1 million in the first quarter of 2008, an increase of 12 percent and seven percent respectively
 
Revenue for the first six months of 2008 was $310.7 million, compared to $279.1 million for the first six months of 2007, an increase of 11 percent.
 
 
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Greg Galitzine (News - Alert) is editorial director of TMCnet. To read more of Greg’s articles, please visit his columnist page.
 
Don’t forget to check out TMCnet’s White Paper Library, which provides a selection of in-depth information on relevant topics affecting the IP Communications industry. The library offers white papers, case studies and other documents which are free to registered users.
 
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