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Broadcom buys Brocade but will sell off IP network business

Chipmaker will acquire Brocade for $5.9bn to broaden its storage business, and plans to sell off most of its acquisition’s networking business

As reported earlier this week, chipmaker Broadcom is to acquire storage and networking supplier Brocade for $5.9bn – $5.5bn in cash and $400m in net debt – but will split the company into two as a result, retaining its core storage area networking business and selling off its IP networking section.

Brocade, formerly best known as a storage supplier, flipped to a networking-led business when it acquired Foundry Networks for $3bn in 2008, and has more recently been positioning itself as a cheerleader in the emerging software-defined networking (SDN) market.

Broadcom, however, is mainly interested in Brocade’s fibre channel storage area networking (FC SAN) business, which it means to use to position itself as a leading supplier of storage connectivity systems.

“With deep expertise in mission-critical storage networking, Brocade increases our ability to address the evolving needs of our OEM customers,” said Broadcom president and CEO Hock Tan.

“In addition, we are confident that we will find a great home for Brocade’s valuable IP networking business that will best position that business for its next phase of growth.”

Brocade CEO Lloyd Carney said: “Our best-in-class FC SAN solutions will help Broadcom create one of the industry’s broadest portfolios for enterprise storage. We will work with Broadcom as it seeks to find a buyer for our IP networking business, which includes a full portfolio of open, hardware and software-based solutions spanning the core of the datacentre to the network edge.”

Among the parts of Brocade that will be sold on are its campus networking, datacentre routing and switching and SDN businesses, as well as its Ruckus Wireless business unit, which it acquired in April 2016.

Note that the deal – which is set to close some time after April 2017 – is not conditional on the successful divestment of Brocade’s IP networking business.

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I would imagine a quick sale as Cisco, HP etc are key clients for Broadcom and direct daily competitors to Brocade on the street.

So who are most likely buyers? Cisco, HP or perhaps Huawei?

...or a hedgefund/VC driven new "combo" including Avaya's networking group + others?


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