Brocade buys Foundry

Brocade announced yesterday its intent to buy Foundry networks for $3 billion, a considerable premium over Foundry's current market cap. This deal is interesting in a variety of ways, but it definitely points towards the importance of Ethernet, particularly Fiber Channel over Ethernet (FCoE) in the future. And in many ways it could be the turning point of the ethernet revolution in the data center.

Technically the deal makes sense. Brocade is a champion of fiber channel. But with FCoE, it is clear that Brocade will be threatened by Ethernet based vendors taking away a slice of backend switches. With Foundry, Brocade can offer a product line complete with technologies over stages of evolution: from fiber channel, to ethernet, to FCoE. It also poses a challenge to Cisco's emergence in the data center.

While this deal sounds good, I have been always skeptical of the execution of the deal when two equal sized companies merge. It just seems difficult to bring two corporate cultures together when neither one can dominate given that the size of the two is almost equal. One prominent example which has not worked till now is the AMD - ATI tech merger, the combined company's net worth being $4 billion now compared to the $5.5 billion for which ATI Tech was initially bought. No it will be interesting to see how things move forward after the deal.