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Is McData Lowballing Sanera?

McData Corp. (Nasdaq: MCDTA) is offering to buy startup Sanera Systems Inc. for $70 million in cash and $30 million in stock at "earn-out," according to a source familiar with the negotiations -- a package that is said to be far less than Sanera's VCs were seeking. "Earn-out" means the startup would receive the stock after the deal closed, depending on the performance of its business.

McData is seeking to acquire the SAN switch company to boost its capabilities in addressing very high-scale fabrics, Byte and Switch reported last week. If such a deal went through, McData, which today leads the market for director-class switches, would be able to add Sanera's 256-port system to its lineup. Analysts say that would let McData leapfrog past Cisco Systems Inc. (Nasdaq: CSCO) just as Cisco starts its concerted run at the Fibre Channel switch market (see Sources: McData to Buy Sanera).

But it appears that McData is offering less than Sanera's investors were asking for. Sanera's VCs were reportedly asking for $175 million.

"Since there is no other potential dance partner... I suspect McData's offer will prevail," says our source.

Sanera has raised $65.3 million to date from CMEA Ventures, Storm Ventures, Enterprise Partners Venture Capital, and others.

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