Analysts: Synergies Are Good for Brocade-McData Union

By Chris Preimesberger  |  Posted 2006-08-08 Print this article Print

Brocade becomes a $2 billion company with the move and fortifies its product line to compete with renewed vigor in the storage networking space.

Analysts say that the synergies between data storage equipment maker Brocade Communications Systems and rival McData—which Brocade said Aug. 8 it will acquire for $713 million in stock—are good and that the proposed merger should eventually bode well for both companies. Brocade executives told investors and analysts in a hastily arranged early-morning conference call that it will acquire rival McData for $4.61 per share. The purchase price equaled a 48 percent premium above Mondays $3.11 closing price on McDatas Class A shares.
If the deal is completed, Brocade, based in San Jose, Calif., will have increased its net worth from $1.55 billion to just under $2 billion, according to Standard & Poors CapitalIQ.
McDatas enterprise value was listed at $455 million at the time of the transaction, CapitalIQ said. When the deal is competed, McData stockholders will own about 30 percent of Brocade, a Brocade spokesman told eWEEK. McData, in Broomfield, Colo., will become a wholly owned subsidiary of Brocade, and John Kelley, McDatas chairman and chief executive, will serve as an advisor to Brocade after closing. Both companies boards have unanimously approved the merger. It still requires regulatory approval and a positive vote from Brocade and McData shareholders. Brocade and McData each provide storage networking and data infrastructure hardware, software and services worldwide. They compete in the enterprise storage networking and OEM markets against such formidable foes as Cisco Systems, QLogic, and Emulex. Next Page: Wall Street nonplussed.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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