Users voice fear, hope over switch-maker buyout

Some worry that Brocade will cut McData's product lines

Customers of Brocade Communications Systems Inc. and McData Corp. said the buyout of McData announced this week has them concerned that it may mean the end of life for some switches they currently use and that a bigger Brocade may change its sales model.

But a top Brocade executive said the two companies will support the status quo for now and will eventually tightly integrate the product lines.

San Jose-based Brocade announced this week that it was buying Broomfield, Colo.-based competitor McData in an all-stock transaction valued at $713 million (see "Brocade to buy McData for $713M").

On hearing the news, Wilson Chan, manager of technical services at the Durham District school board in Ontario, Canada -- which announced late last month that it had consolidated its storage onto McData directors -- sees both advantages and disadvantages to the acquisition. He said the buyout will probably spur "bigger, better services" and better research and development and products. On the other hand, Chan said he's concerned that the company will drop some of McData's products.

Mike Campbell, director of PC systems and support for at University of New Mexico Hospitals in Albuquerque, chose McData equipment in March over Brocade's switches. Campbell said he was surprised by the announcement. "We bought McData because we thought the company had good technology, so we're going to be concerned about what Brocade might do there," he said.

Rich Ward, director of technical services at the Philadelphia Stock Exchange, said he is not particularly concerned by the acquisition. However, he said that as a Brocade user, he has the upper hand in the deal. Ward said his primary concern is that as Brocade grows, it may change the way it works with its partners, such as going with more of a direct marketing model, which could affect Ward's business down the road.

Tom Buiocchi, Brocade vice president of marketing, said in an interview with Computerworld that the acquisition would benefit users by simplifying their lives with a common platform, switch interoperability and common management tools. In addition, the companies will be able to invest more into engineering and research and development, as well as bring new products to market faster, he said.

Nolan Evans, chief technology officer at FlexITy Solutions Inc., a Richmond Hill, Ontario-based IT integrator that partners with both Brocade and McData, agreed with Buiocchi. He said the deal will help improve interoperability in the Fibre Channel market because there will now be just two major players -- Brocade and Cisco Systems Inc. Evans said a lack of interoperability has been holding Fibre Channel adoption back.

When Computer Network Technology Corp. (CNT) acquired Inrange Technologies Corp., and then McData acquired CNT, McData seemed to absorb the appropriate technology while maintaining its product line, according to Evans. He said he expects Brocade to do the same, perhaps by keeping its line of hardware and adding McData compatibility.

Until the deal closes -- sometime after Jan. 30 -- Buiocchi said the companies will continue to operate as separate entities while a team composed of representatives from each company talks about how best to integrate products, organizations and sites. In the meantime, the companies will continue selling all their respective products.

The companies have not yet determined what criteria to use to decide which technologies in their overlapping product lines will stay, but volume and user loyalty will play a part, Buiocchi said.

"As long as [users] want to buy those products, they're going to get them," Buiocchi said. "Customer retention and satisfaction is paramount." This could also include keeping competing products in the product line, he said.

Buiocchi denied analyst comments that the merger had anything to do with competing more aggressively against Cisco. "Nothing. Zero. This is all about delivering on a vision," he said. Similarly, Buiocchi shrugged off a disapproving stock market, which sent Brocade stock down almost 20%, as a one-day reaction.

Both end-user and reseller customers, including EMC Corp., have been unanimously supportive of the McData buyout, Buiocchi said. In the case of resellers, the deal is likely to reduce their costs, he said.

Copyright © 2006 IDG Communications, Inc.

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