Brocade to Buy McDATA for $713 Million

Published: August 21, 2006

by Alex Woodie

Brocade Communications Systems, a manufacturer of switches used in storage area networks (SANs), plans to buy rival McDATA in an all-stock transaction valued at $713 million.

Michael Klayko, CEO for San Jose, California-based Brocade, said the acquisition of McDATA will build on Brocade's vision for the next-generation data center. "This combination will accelerate the pace of innovation, enable us to build stronger relationships with our customers and partners, and provide greater scale and efficiencies to accelerate our growth," Klayko says.

John Kelley, chairman, president, and CEO of Broomfield, Colorado-based McDATA, says the deal benefits customers and investors. "For our customers, it provides the investment protection and a clear path to next-generation data center products and technologies," he says.

The companies say the merger will bolster their profitability--possibly by as much as $100 million within a year--by pooling their resources and eliminating redundancies, although the companies didn't discuss specifics relating to headcount reductions. The companies also need to explain the converged product roadmap going forward.

The transaction has been unanimously approved by the boards of directors of both companies, and could be completed as soon as Brocade's first fiscal quarter of 2007, which ends January 31, 2007.