Brocade is ripe again

Like seasonable fruits, Brocade is ready to be plucked from the Fibre Channel tree (again). A few years ago, it put itself up for sale. There were suitors but no one offered to take up Brocade. Over the last few days, the rumour mill is at it again, and while Brocade did not comment, the news is happening again.

Why is Brocade up for sale? One can only guess. Over the past year, their stock has been pounded in the past months and as of last Friday, stood at USD4.51. The news mentioned that Brocade market capitalization is around USD2.7-2.8 billion, low enough to be acquired.

Brocade has been a fantastic Fibre Channel company in the past, and still pretty much is. They have survived the first Fibre Channel shake-up, and companies like Vixel, Gadzoox, and Ancor are no longer in the Fibre Channel’s industry map. They have thrived throughout, until Cisco MDS started to make dents into Brocade’s armour.

Today, a big portion of their business still relies on Fibre Channel to drive revenues and profits. A few years ago in 2008, they acquired Foundry Networks, an Gigabit Ethernet company and it was the right move as the world was converging towards 10 Gigabit. However, it is only in the past 2-3 years, that Brocade has come out with a more direct approach rather than spending most of their time on their OEM business in this region. Perhaps this laggard approach and their inaction in the past have cost them their prime position and now they are primed to be swooped up by probable suitors.

Who, will be the probable suitors now? IBM, Oracle, Juniper and even possibly Cisco could be strong candidates. IBM makes a lot of sense because I believe IBM wants to own technology and Brocade has a lot of technology and patents to offer. Oracle, hmm … they are not a hardware company. It is true that they bought Sun, but from my internal sources, Oracle is not cool with hardware innovations. They just want to sell more Oracle software licenses, keeping R&D and innovation on a short leash, and keeping R&D costs on Sun’s hardware low.

Juniper makes sense too, because they have a sizeable Ethernet business. I was a tad bit disappointed when I got to know that Juniper started selling entry-level Gigabit switches, because I have always placed them at lofty heights with their routers. But I guess, as far as business goes, Juniper did the only natural thing – If there money to be made, why not? If Juniper takes up Brocade, they can have 2 formidable storage networking businesses, Fibre Channel and Data Center Ethernet (DCE). The question now is – Does Juniper want the storage business?

If Cisco buys Brocade, that would mean alarm bells everywhere. It would trigger the US side to look into anti-competitive implications of the purchase. Unfortunately, Cisco has become a stagnant giant, and John Chambers, their CEO is dying to revive the networking juggernaut. There were also rumours of Cisco breaking up to unlock the value of the many, many companies and technologies they acquired in the past. I believe, buying Brocade does not help Cisco, because as they have done in the past with other acquisitions, there are too many technology similarities to extract Brocade’s value.

We will not know how Brocade will fare in 2012, suitors or not, because they are indeed profitable. Unfortunately, the stock options scandal last year plus the poor track record of their acquisitions such as NuView, Silverback, and even Foundry Networks, are not helping to put Brocade in a different light.

If the rumours are true, putting itself up for sale only cheapens the Brocade image. Quid proxima, Brocade?

Dell acquiring Force10

What do you think of Dell acquiring Force10? My first reaction was surprise, very surprised.

I was in the middle of a conversation with a friend when the RSS feed popped up in front of me – “Dell acquiring Force10″! I cut that conversation short to read the rest of the details … wow, that’s a good buy!

With all the rumors flying around that Brocade was the most obvious choice, Force10 was out of the blue for me. As the euphoria settled down, I thought Dell had made a very smart move. Brocade, unfortunately, is still pretty much a Fibre Channel company, with 75% of its business relying heavily on Fibre Channel and FCoE. Even though Brocade has Foundry now, Brocade has not strongly asserted itself as an front runner and innovator of 10Gigabit Ethernet.

Meanwhile, Force10 has been a up-and-coming force (pun intended) to be reckon with, strengthening its position as a 10GbE player in the market. And with 10GbE now, and 40GbE or 100GbE coming in the next 2-3 years, Force10 will be riding the wave of the future. Dell can only benefit from that momentum.

Dell has been very, very aggressive to push itself into the enterprise storage space. From its acquisition of EqualLogic in 2007, to Exanet, Ocarina and Compellent last year, there is no doubt that Dell wants this space badly.

The first challenge for Dell is to put its story together and convince the customers that they are no longer Dell, the PC/laptop direct seller, but a formidable company capable of providing enterprise solutions, services and support.

The second challenge, and even bigger one, is itself; its culture of changing mindset. The game has changed; the rule has change. The enterprise is a totally different ballgame. Is Dell ready? Is Dell ready to change itself?

Maybe the Force(10) be with Dell!