Tuesday, August 8, 2006

Brocade Buys McDATA For $713M

San Jose-based Brocade Communications said this morning that it is acquiring Broomfield, Colorado-based competitor McDATA, in a transaction worth $713M. The companies said that they have entered into a definitive agreement where Brocade will acquire McDATA for 0.75 shares of Brocade stock for each share of McDATA Class A or Class B common stock. The move puts together two of the largest manufacturers of Fibre Channel switches and networking equipment for the data storage industry. Both firms compete head to head in the increasingly competitive data storage networking industry, supplying gear that connects storage to enterprise computing systems. Brocade and McDATA said that the merger is expected to generate approximately $100M coming from headcount and non-headcount related expenses. McDATA reported $98M in revenues for its last quarter; Brocade said today that it expects to report revenues of $188 to $189M for the Q3 06 quarter. McDATA is a major supplier of Fibre Channel director technology; Brocade supplies similiar director-class Fibre Channel switches along with lower-end Fibre Channel workgroup switches. Brocade is being advised by Wilson Sonsini Goodrich & Rosati and Morgan Stanley & Co. in the acquisition; McDATA is being advised by Gotshal & Manges LLp and Credit Suisse. McDATA is listed on the Nasdaq as MCDT, Brocade as BRCD.