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McData Bags CNT for $235M

McData Corp. (Nasdaq: MCDTA) has confounded the experts once again, deciding to snap up Computer Network Technology Corp. (CNT) (Nasdaq: CMNT) for $235 million (see McData to Acquire CNT and Investors React to McData-CNT Chatter).

The deal, which was rumored to be in the works last Friday -- yet discounted by some analysts -- is designed to help McData see off the challenge of rivals Brocade Communications Systems Inc. (Nasdaq: BRCD) and Cisco Systems Inc. (Nasdaq: CSCO). McData is the market leader in director switches, but its share has been steadily eroded by Brocade and Cisco in the last year (see SAN Switch Year-End Summary and McData Merely Mediocre).

Integration won't be easy: McData and CNT both have a little over 1,000 employees apiece, and whether CNT's Minneapolis headquarters will continue to operate along with to McData's Broomfield, Colo., offices, remains to be seen.

Also unclear is whether the CNT executives will stay on. CNT CEO Thomas Hudson, one the industry's best-paid execs (see 2004 Top Ten: CEO Payouts), will join the board of the merged company, along with another undesignated CNT exec. But it's not clear whether Hudson or others will continue to hold full-time jobs with the company.

The markets response to the news was decidedly lukewarm from a McData perspective, and downright negative from the perspective of CNT shareholders. In early trading this morning, McData’s shares rose 13 cents (3.28 percent) to $4.09. Shares of CNT fell 97 cents (14.65 percent) to $5.65.

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