Watch out Cisco: Brocade buys Foundry for $3 billion

In a move seen as posing stronger competition to industry giant Cisco Systems in storage networking, fiber channel (FC) specialist Brocade Communications has acquired Ethernet switch maker Foundry Networks for $3 billion.

With the merger, Brocade will now join Cisco in owning toeholds in both areas. Beyond giving Brocade new expansion opportunities into general networking, the deal looks likely to offer a more solid second alternative to business customers interested in combining fiber channel (FC) storage networking technology, Brocade's traditional forte, with Ethernet, some analysts say.

"Three billion bucks is a lot of bucks by any measure," acknowledged Charles King, principal analyst at the Pund-IT industry analyst firm.

"But FC has been getting challenged lately by Ethernet. Customers have been looking at networks that can leverage both technologies, letting them use FC where it's needed and Ethernet where it's not," King told BetaNews.

Right now, Brocade seems to be keeping pace with Cisco on the switch side. In January, Brocade introduced the DCX Backbone, a switch with similar functionality to the Catalyst 6500 unveiled by Cisco that smame month. Both products are aimed at using virtualization to connect SANs with local area networks (LANs) on a single network.

But still, some industry observers have doubted whether Brocade would match Cisco's roadmap for stepping into the still emerging area of fiber channel over Ethernet (FCOE).

"Brocade has been poised to get into this area, but developing the technology internally could have been cost prohibitive," said King.

Certainly, though, Brocade has been eyeing FCOE for some time now. During a conference call with financial analysts in May, for instance, Brocade CEO Mike Klayman mentioned a recent "design win" by Brocade for FCOE. "We just wanted to make a statement we're clearly in the market with competitive products," Klayman said.

On the traditional FC side, Brocade partners on SAN implementations with large OEMs such as Hewlett-Packard, IBM, and EMC. In 2006, Brocade acquired McData, one of its former competitors, for $713 million. Meanwhile, several other FC specialists have fallen by the wayside, King noted.