I had sent a congratulatory note to an old buddy of mine who’s at Foundry when I heard about Brocade’s $3B offer to buy the ethernet switching company. His reponse was “ya right – my options don’t vest for another two years, so I’ll take a rain-check on that; meanwhile I’m not sure the Brocade CEO would know an ethernet switch if it hit him on his head”. Hmmm… whether Michael Klayko knows ethernet switching or not, the Chairman of Brocade’s board, Dave House certainly does, having run Bay Networks and Allegro. From a strategic perspective, the deal makes perfect sense – Brocade is an FC vendor and the storage/data-center market is moving to Ethernet. Also Brocade+Ethernet vendor would be the right way to compete with Cisco’s Nuovo in the data center. Why it was Foundry rather than Force 10 is an interesting point.
Om Malik has more on this in his blog: http://gigaom.com/2008/07/21/brocade-foundry/
Two related points worth highlighting: (1) The Data center battle is looming not between Brocade and Cisco, but more broadly between networking vendors and middleware/storage vendors. While the MSFT – Cisco battle for the UC and security market is well known, no one is talking about the impending battle for the data-center – between Cisco and IBM (have more on that later); (2) Is this deal a sign that consoldiation in the enterprise networking space is finally happening? We’ve seen consoldiation in the carrier space over the past 2-3 years (Alcatel+Lucent, Ericsson+Marconi+Redback, Nokia+Siemens etc), so are investors finally begining to wonder why the world needs 10 different ethernet switching vendors with absolutely zero true differentiation? Time will tell, but my guess is that this just the beginning and tech M&A bankers are already chomping at the bit.
