The world of network gear saw some M&A this morning, as Broadcom announced a deal to acquire Brocade Communications Systems. The deal will see the communications chipmaker expand its presence in data storage products. Broadcom is paying $12.75 per share, which works out to some $5.5B.
Reports earlier this week had Brocade looking for a buyer, and indeed they were. Brocade specializes in network products centered on the fiber channel protocol that are a mainstay of storage area networks, and that’s the piece that Broadcom wants. But the other side of Brocade is IP networking solutions, and Broadcom says it intends to divest it. So there is probably another shoe yet to drop in the coming months, as we see buyers line up for that.
Broadcom will fund the purchase with cash on hand and new debt, and will bring $400M of Brocade’s debt onto its balance sheet as well.
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Very interested and concerned for the IP platform. Would a larger player come in and pick up those pieces and fold due to keep out competition?
Doesn’t make sense.