Brocade shells out $3b to takeover Foundry Networks

22 Jul 2008
00:00

(Associated Press via NewsEdge) Brocade Communications Systems is plunking down $3 billion for Foundry Networks, melding two companies with presence deep in the data center and posing a direct challenge to industry behemoth Cisco Systems.

The deal announced Monday represents an attempt by San Jose-based Brocade to expand beyond data storage equipment and begin selling machines used to shuttle internet traffic, Cisco's home turf.

Brocade dominates the market for a type of switch that connects servers to data storage machines.

Cisco is a small player in that area, but has long been the leading provider of routers and switches that direct internet traffic. That industry has become increasingly attractive as internet traffic, particularly bandwidth-hogging video, has exploded, and companies and internet service providers have to spend mightily to upgrade their networks.

Foundry is a smaller competitor to Cisco in that area.

The acquisition promises to make Brocade a more well-rounded competitor to Cisco, but isn't likely to substantially dent Cisco's dominance because Foundry Networks is considered a niche player, albeit at the high end of the market, which means the company can command higher prices and healthy profit margins.

Despite its smaller size _ Foundry had $607 million in sales last year, compared with Cisco's $29 billion _ Foundry is known for its innovative technologies and has a loyal base of customers in the government, health care and financial services industries.

© 2008 The Associated Press

© 2008 Dialog, a Thomson business. All rights reserved

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