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CNT, McData Mull Product Conundrum

In a rescheduled earnings conference call yesterday, execs at Computer Network Technology Corp. (CNT) (Nasdaq: CMNT) said accounting problems pose no immediate threat to its pending acquisition by McData Corp. (Nasdaq: MCDTA). But any delays in closing the deal keep potential customers in the dark regarding the switch vendors combined roadmap.

CNT CEO Hudson admits the accounting problems that delayed CNT’s earnings report will kill any chance of the McData deal closing early (see CNT Drags Its Feet on Earnings). Although they never publicly moved up the expected closing date, McData executives were hoping for a quick close after receiving early Hart-Scott-Rodino antitrust and preliminary Securities and Exchange Commission (SEC) approval earlier than expected (see McData Bags CNT for $235M and McData Wraps Rocky Year).

“They have been consistent on trying to close this by the end of May,” Hudson said Tuesday night on CNT’s conference call. “I think we’ve probably blown any of the early timeframe to do it much earlier than that.”

McData wants to close quickly so it can clear up any confusion about the overlap in products. McData CEO John Kelley would like to unveil the combined companies’ product roadmap as soon as possible, and CNT’s earnings raise an interesting question about competing directors. Indeed, ever since McData announced it would spend $235 million on CNT in January, there has been speculation over how it would handle product overlap between its new Intrepid 10000 (i10K) and CNT’s UltraNet Multi-service Director (UMD).

Both products were developed at a high price. McData spent $102 million on Sanera for the i10K, and CNT paid $190 million for Inrange Technologies to obtain the UMD (see McData Completes Sanera Acquisition and CNT Walks Off With Inrange). Considering McData needed more than a year to launch the i10K after acquiring Sanera and has been hyping the director for at least seven months, industry insiders expect McData to keep it (see McData Stays Out of the Red and McData Goes on Offensive).

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