Thoughts on Broadcom Acquisition of Brocade

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Written by Andy Salo, COO of Inocybe Technologies

Congratulations to the employees and shareholders of Brocade. An acquisition price of $5.9 Billion by Broadcom that includes $400 Million of Brocade debt is a 47% premium to their most recent stock price.  It certainly seems like an offer the management team couldn’t refuse. What is perhaps puzzling, and atypical from what we normally see in an acquisition, is the reason behind the purchase according to Broadcom. Primarily Broadcom stated they are looking to consolidate and complement their product offerings with Brocade’s Storage Networking gear. In addition, Broadcom announced that they intend to quickly sell off Brocade’s entire suite of IP Networking software and hardware.

The Fibre Channel storage networking market is generally acknowledged to be a declining market (See: The Sinking Fibre Channel SAN). IP Networking, including the Ruckus Wireless products (acquired for $1.5 Billion in April 2016) and Brocade’s Software Defined Networking (SDN) products are certainly considered to be strong, growing markets. But, because of “competitive overlap with some of Broadcom’s most important customers,” they are moving forward with selling these high growth products.

That high-level message is not something you normally see in an acquisition. ‘Let’s pay a premium for a declining business while we sell off the good stuff’. One has to wonder what Brocade’s IP Networking customers, including customers of their OpenDaylight-based products will think about the move. Users don’t want to be left in limbo while their product’s fate is decided. Will they wait for a decision, or will they move on?

Fortunately, customers have choices. Inocybe has been a top contributor and committer to the OpenDaylight project since it’s inception, and recently increased our commitment to OpenDaylight in becoming a Gold member. To help former Brocade customers that may be feeling angst over the future of Brocade’s commitment to Software Defined Networking and their perilous OpenDaylight product direction, we are launching a Brocade Competitive Upgrade Program.

If you’re currently leveraging an OpenDaylight-based product from Brocade and are now evaluating alternatives, we have a very competitive limited-time offer.

Contact us through our website or email us at [email protected] to learn more!

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