Muddying the situation somewhat is the potential sale of Avaya’s networking business by private equity firm Silver Lake. Kerravala says there’s room for consolidation among these vendors. There’s a whole host of other vendors competing for the remaining market share, including Extreme Networks, Alcatel Lucent Enterprise (now owned by private equity firm Huaxin), Avaya (which is selling its networking business), Juniper, Mitel and others. Brocade is in somewhat of a tough position going up against Cisco and Hewlett Packard Enterprise, the market share leaders for data center networking equipment. Kerravala believes there could be a broader market though. That would not be a bad thing for customers, he notes as typically these firms narrow the focus of the business and drive profitability. So who would buy these Brocade assets? It’s unclear at this point because no companies have made outright statements expressing interest, leaving analysts to mostly speculate.įorrester networking analysts Andre Kindness believes the most likely outcome will be a private equity firm purchasing the assets.
Long-time Brocade customers have been through this volatility before Brocade got into the networking business by purchasing Foundry in 2008. "Consequently, Brocade’s IP-networking business must go."īrocade also recently bought wireless networking provider Ruckus, which Kerravala says made the assets even more attractive. "Broadcom does not want to give even the slightest impression that it is competing against the OEM and ODM switch vendors that buy its Ethernet merchant silicon and other networking chipsets," explains IDC networking analyst Brad Casemore.
Broadcom is buying Brocade primarily for its storage area network business, which it will integrate with its chips.
#Who will buy brocade ip business software#
“Broadcom, with the support of Brocade, plans to divest Brocade’s IP Networking business, consisting of wireless and campus networking, data center switching and routing, and software networking solutions,” the press release states.īroadcom sells silicon chips to networking vendors and doesn't want to compete with its customers by also selling Brocade’s networking hardware. When announcing the deal, Broadcom made its plans to sell Brocade’s IP networking business clear. By disposing of Brocade’s networking business, it could help mitigate this issue.īloomberg reported on Monday that Brocade was nearing a deal to be sold and that Broadcom was among potential buyers.News of Broadcom buying Brocade for an estimated $5.5 billion comes with some caveats: Most notably, chipmaker Broadcom isn’t planning to keep Brocade’s Ethernet business. Morningstar analyst Brian Colello said in a research note on Tuesday his biggest concern about a potential deal would be Broadcom having to compete with some of its key customers such as Cisco Systems Inc. By adding Brocade’s high-margin fibre unit, it would further bulk up its capabilities to help customers with the backbones of their data centers. Last year, when Broadcom was called Avago, it made a push into fibre and adapters with the acquisition of Emulex. semiconductor maker by revenue, behind Intel Corp and Qualcomm Inc, with a market capitalization of $66.4 billion. Shares of Brocade closed 6 percent higher at $11.24, while Broadcom shares closed 0.9 percent lower at $168.80 on Tuesday.īrocade would be the latest addition to the sprawling company known as Broadcom, now the third-largest U.S. This unit generated $209 million in product revenue in the third quarter.Ī deal for Brocade, whose market capitalization has risen to $4.5 billion on merger talk, would come a week after the semiconductor’s industry’s largest-ever tie-up when smartphone chipmaker Qualcomm Inc agreed to buy NXP Semiconductors NV for about $38 billion. While the companies are in advanced discussions, no deal is final and talks could still fall apart, the people cautioned.Ī big part of Brocade’s IP networking business that Broadcom would look to divest was acquired as part of Brocade’s $1.5 billion acquisition of Ruckus Wireless earlier this year. If the U.S.-and-Singapore-based company succeeds in buying Brocade, it would keep Brocade’s fibre channel and storage business, which has roughly $1.5 billion in annual revenue, while it would aim to divest its networking business, the sources said, asking not to be named because the matter is private.īroadcom and Brocade declined to comment.