July 21, 2008
Brocade Communications Systems Inc. (Nasdaq: BRCD) is buying up Foundry Networks Inc. (Nasdaq: FDRY) for $3 billion, the companies announced this evening. (See Brocade to Buy Foundry.)
The deal moves Brocade beyond storage area networking and into Ethernet equipment and IP routers -- including routers for the telecom core network as well as the data center.
Brocade is offering cash and stock worth $19.25 per share for Foundry -- an immense premium, considering Foundry shares closed at $13.66 today.
It's no shock, then, that Foundry shares are soaring in after-hours trading -- up $4.52 (33%) to $18.18 each at press time.
Brocade shares were down $1.33 (16%) to $7.00.
The deal could create an interesting competitor to Cisco Systems Inc. (Nasdaq: CSCO) in the so-called next-generation data center. Cisco is Foundry's biggest rival in Ethernet and IP, of course, and recently expanded its data center ambitions with the Nexus line of gear that will eventually combine Fibre Channel and Ethernet switching. (See Cisco's Nexus Targets Data Center's Future.)
The financial sector has been expecting a deal in this space, but it's Extreme Networks Inc. (Nasdaq: EXTR) that they assumed was getting picked up -- a scenario that still might happen. (See Extreme + Enterasys? and Extreme for Sale?) Foundry was considered less likely because CEO Bobby Johnson reportedly hasn't been open to deals in the past.
The companies expect to close the deal in the fourth quarter of 2008.
Light Reading will update the story as details emerge.
— Craig Matsumoto, West Coast Editor, Light Reading
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