Picked up early this morning on Wall Street Journal is breaking news about a potential sale of Brocade to the right buyer. Among the parties interested in the networking vendor are Hewlett-Packard and Oracle.

Brocade has a market cap of US$3.2 billion with 2008 revenue at nearly US$1.5 billion.

Any sale of Brocade will likely impact the business of HP, IBM, HDS, Sun Microsystems and EMC. All these vendors resell Brocade-made products either under OEM or the Brocade label. In the short-term, Cisco sales people will have a field day running after long-time Brocade customers and channel partners as the usual “fear, uncertainty and doubt” or FUD gets thrown in to wreck the nerves of companies that have invested heavily in Brocade technology to keep their storage area networks up and running.

Brocade dominates the Fibre Channel switch market following its acquisiton of McData in 2006. Recognizing the importance of Ethernet in the overall network storage fabric ecosystem, it bought Foundry Networks in 2008.

Rumors of Brocade being up for sale dates back as far as 2003 when McData was rumored to be in talks with Brocade to acquire the latter. But three years later, it was the other way around. I doubt that we will see Cisco buying Brocade if only to kill the competition and dominate the market. but certainly if HP acquires Brocade it would significantly enhance its networking capability.

Rumors of HP’s interest in Brocade have been floating around for years. It would certainly complement’s HP’s networking portfolio which is largely hinged on the HP ProCurve business and supplemented by its OEM deal with Brocade.

Oracle is the bigger wildcard here. Oracle is in the midst of closing its Sun Microsystems acquisitions. The market is awash with rumors that the hardware piece of Sun would be sold off. But if Oracle were to acquire another hardware vendor – say Brocade – it would certainly mean that any potential sale of Sun hardware may no longer be on the table and that Oracle is really commited to its CEO’s vision of offering customers complete systems.

Ittai Kidron, an analyst at Oppenheimer & Co., explains in a research note that an Oracle acquisition of Brocade suggests the company will have to commit to the hardware business for the long-term. Brocade is a nice fit and has no overlap with its Sun purchase according to Kidron.

Any acquisition of Brocade by any of the server vendor will have to be thought out properly. Brocade has large OEM and reseller deals with a number of server vendors. As the Cisco entry into the server business has shown, vendors will more than likely shop elsewhere if Brocade becomes just another product line of a server vendor.

Enterprise Strategy Group analyst Bob Laliberte reckons IBM and Dell may also be potential buyers, “I don’t think you’ll see EMC or Cisco buy them.”

Stifel Nicolaus Equity Research analyst Aaron Rakers also put in Juniper as another possible buyer.

Watch this space as we monitor, report and analyze the developments surrounding the potential sale of Brocade. At this point it is everyone’s guess as neither Brocade nor the potential suitors are saying mum. It is also very possible that Brocade is just trying to get a feel for the market. Afterall rumors are the stuff of the tech industry.

Advertisements

My colleague asked me to attend a roundtable briefing at SUN Microsystems’ Hong Kong office on 3 December. Having worked at a storage vendor myself years ago, in a marketing role no less, I am learned in the ways of whitewashing stories to the point where they sit between science fiction and magic. And identifying which is what is just as challenging.

SUN’s Open Storage strategy promises to significantly drive down the cost of current generations of proprietary storage solutions from vendors like HP, IBM, EMC, Fujitsu, Dell, HDS and SUN (yes, SUN also has proprietary offerings) by (1) using commodity components where possible; and (2) giving away much of the base software that is the intelligence behind expensive but proprietary storage systems, Sun hopes to enterprises to consider the potential benefits that lower acquisition cost brings with open source storage.

Storage back to basics

Most enterprise and mid-market storage systems use proprietary software – embedded on the hardware and add-on software to adhere to a particular service level. While certain hardware components are roughly the same – hard disks, fans, frame or chassis – the software is what gives each storage system its unique personalities. It is this ‘personality’ which gives you the five 9s or auto-failover or ability to call home when the device thinks its sick and other fancy termed features. (more…)