Opinion: Brocade, McData to blacken Cisco's eye?

This acquisition came out of left field

OK. I have one word for this Brocade/McData deal: Wow. I can't and won't claim to be the rumor maven, but I can say that I was blind-sided this morning of August 8, 2006 at 6:30 am when I checked into email and saw the press release telling me that Brocade intends to buy McData. The companies' two CEOs say they've been quietly discussing such a deal for some time, but that the ball really got rolling within the last two months. Who knew?

There were no other offers tendered for McData. That fact alone speaks volumes to me. Here's what I think it says: Two major storage networking brands got tired of fighting each other for the attention of OEM partners. The real battle for the hearts and markets of major OEMs like EMC and HP is with Cisco. Without the deal, Cisco essentially has the potential to divide and conquer without firing a single shot. Now, Cisco is challenged by a formidable competitor. Ergo, the benefits of such a deal accrue to both McData and Brocade shareholders. 

Wall streeters appear to be greeting the news with a characteristic "please explain to us why this deal makes sense" attitude. What short memories they have. One year ago, they thought Brocade was headed south while McData was riding high. Now that Brocade turned in its best quarterly performance ever, they think the exact opposite. Hey guys, couldn't that be a good reason for this deal?

So, this paring has the potential to take more than a few interoperability issues off the table. Wall streeters don't care about that. Storage administrators do. I also think that the potential for multiple synergies that could result from all of the acquisitions made by both companies gets lost in the announcement reverberations. OEMs will definitely care about that.

Welcome the new Brocade with its McData subsidiary. Short term, it's status quo for the product lines of both companies with long-term convergence in the forecast. Sorry, but at this point I can't be more specific. For sure there will be some layoffs, and the Boulder, Colo. economy just took another hit. But, the sense I have is that the executive management teams from both companies are energized for what will now be a title bout with Cisco.

John Webster is senior analyst and founder of research firm Data Mobility Group LLC. He is also the author of numerous articles and white papers on a wide range of topics and is the co-author of the book Inescapable Data: Harnessing the Power of Convergence (IBM Press, 2005). Webster can be reached at jwebster@datamobilitygroup.com.

Copyright © 2006 IDG Communications, Inc.

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