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Brocade takes in Foundry to take on rivals
By siliconindia
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Friday, 08 August 2008, 19:14 IST
Bangalore: To increase its reach and competitiveness in the Asia Pacific market, Brocade, a provider of data center networking solutions, has signed a definitive agreement to purchase Foundry Networks, a provider of solutions for network switching and routing, for three billion dollars.
To acquire Foundry, Brocade will pay via a combination of cash and shares. It will pay $18.50 of cash plus 0.0907 shares of Brocade common stock in exchange for each share of Foundry common stock. The deal, which is expected to be accretive to Brocade non-GAAP EPS in its fiscal year 2009, will close in the fourth quarter of calendar year 2008.
With the acquisition, which will bring together two companies in complementary technology sectors and allow the combined entity to address customer needs, the Brocade will be able to intensify its competition against the rivals, especially Cisco.
Recent past had been witnessing both Brocade and Cisco coming out with new switches and other network infrastructure solutions aimed at virtualizing the network interface cards, host bus adapters, and cables that connect servers to networks and remote storage. Intending for the enterprise data center, Cisco in January introduced Nexus which was preceded by, the Catalyst 6500, one of the successful switches the company came out with so far. Brocade the same month introduced a new switch DCX Backbone, which as Nrexus, consolidates SAN and LAN into a single network, and virtualize NICs that connect them to virtual servers.
"Today, Data center virtualization is the hot topic at every table that discusses IT related development. As it will help companies reduce the cost and maximize the productivity, we are innovating in this front also", says Deb Dutta, Vice President, Asia Pacific/Japan, Brocade.
Brocade, which was founded in 1995 and has a headcount of 2500, believes that after buying Foundry with an employee base of 1,100, the combined entity would be well positioned to create unique synergies. "Through this deal, Brocade is now positioned in the networking industry to deliver solutions portfolio spanning local, metro, wide and storage area networks," said Zeus Kerravala, Sr. Vice President, Global Enterprise Research at the Yankee Group.
Brocade anticipates financing the acquisition through a combination of cash on hand and approximately $1.5 billion of committed debt financing from Bank of America and Morgan Stanley Senior Funding, subject to customary terms and conditions.
"We believe the industry is at an inflection point in the way enterprise and service provider networks and data centers are being architected. Customers are demanding networking solutions that meet the needs for today and can address the many advances in network convergence that are still ahead," said Mike Klayko, CEO of Brocade.
Foundry was founded in 1996 and went public in September 1999.
