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Investors React to McData-CNT Chatter

Day-long rumors that McData Corp. (Nasdaq: MCDTA) will buy switch rival Computer Network Technology Corp. (CNT) (Nasdaq: CMNT) had significant effect on both companies stock prices, but industry analysts doubt any deal will happen soon.

CNT’s stock shot up more than 15 percent today to $6.62 by 4 p.m. EST, while McData’s continued a recent trend down, dropping more than 11 percent to $4.25. The rumor began last night, fueled by rampant speculation in the industry that there will be consolidation of switch vendors (see RBC Poll Forsees More M&A). Brocade Communications Systems Inc. (Nasdaq: BRCD), Cisco Systems Inc. (Nasdaq: CSCO), and McData are the big three -- with CNT a distant and struggling fourth.

Neither McData nor CNT would comment on the rumors, which did nothing to quiet them. Financial analysts say there have been no signs of a McData-CNT deal in recent days, though.

“We don’t believe it,” says analyst Steve Berg of Punk Ziegel & Co.

“Our source tells us that McData’s management hasn’t even spoken with their banker [Credit Suisse First Boston Corp.] in two weeks. And why was CFO Ernie Sampias at Needham & Co.
[Growth Conference] Wednesday if he was negotiating an M&A transaction?”

Another analyst who asks to be unnamed says he doesn’t believe such a deal is in the works -- and it would be a bad idea for both companies.

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