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Brocade And McData Merge To Fend Off Cisco

In a move aimed at defending their positions in the storage-switching and director market against Cisco Systems, Brocade has agreed to acquire rival McData in a transaction valued at $713 million.

That represents a 48 percent premium over McData's Monday closing price and a 32 percent premium over its 50-day moving average, according to Enterprise Strategy Group.

Brocade and McData have long been competitors in the storage-switching market, but Cisco in recent years has launched a formidable challenge to both companies with its own line of SAN switches. Brocade's 2005 revenue was $574 million, 4 percent down over 2004, while McData's revenue was $614 million, up more than 50 percent over the previous year.

All three companies, as well as QLogic, are key providers of enterprise SAN fabric switches and directors, and have OEM relationships with most of the key providers of storage arrays, including EMC, Hewlett-Packard, IBM and Sun Microsystems.

But customers and systems integrators tend to specify their SANs based on specific switches, depending on data-center configuration and capacity requirements. Brocade and McData are both viewed as the leading suppliers of storage switches and directors, with the latter stronger in the high end of the market.

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