Network Computing is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Brocade's Costly Victory

3:50 PM -- Investors today are wondering why, after winning its war with McData, Brocade spent $713 million to sign a peace treaty. (See Brocade Bags McData For $713M.)

The price tag appears steep, unless Cisco was ready to pounce on McData or McData was poised for a rebound. But neither seems to be the case. Brocade CEO Mike Klayko admitted there were no other bidders to drive up the price for its rival. And there's no sign of a McData rebound -- especially after it disclosed today that it had yet another disappointing quarter.

According to CEO John Kelley, 2005 was supposed to be McData's big year. That's when it finally got around to shipping products -- including its flagship i10K director -- from 2003 acquisitions of Nishan Systems and Sanera Systems. But McData was late with 4-Gibt/s gear and certification of its i10K from EMC was held up due to a series of problems. McData struggled throughout 2005, and things turned worse in 2006. (See McData Takes a Direct Hit and McData Trails Switch Rivals.)

According to market research firm Dell'Oro Group, McData's director share shrunk from 86 percent in 2001 to 36 percent in the first quarter of this year.

"McData was in what looked like an unstoppable downward spiral," says a technology analyst who asked not to be named. "They were losing market share rapidly in the director market to Cisco and were lacking strategic vision. They were late on their 4-gig transition and still do not have it in the i10K. So they were no threat to either Brocade or Cisco. I think Brocade paid too much."

  • 1