Brocade is apparently not for sale after all, if the blogosphere is correct about CEO Mike Klayko flashing a "Not For Sale" slide at a recent company sales meeting. The Wall Street Journal reported last month that Brocade had put itself on the block and that HP and Oracle were sniffing around.
But this post by Frank Berry on SeekingAlpha says it may be so that Klayko emphatically denied the company was for sale, and then lays out why Berry believes him. Borrowing from the October 7 Canaccord|Adams Daily Newsletter titled "For Sales Good as Sold?", Berry lays out the argument for why a deal for Brocade is not imminent.
Among them are Brocade's OEM model and the impact on FibreChannel, 60% of Brocade's revenue. Selling to various OEMs keeps FibreChannel around a little bit longer while the transition to FibreChannel-over-Ethernet fans out. Also, being bought by a single OEM would limit the appeal and total available market for Brocade's own Ethernet switches just as resistance to Cisco ramps. As the newsletter in the Berry post succinctly states:
"A sale today is like punting on second down"
Berry's post also notes that there are less expensive, less disruptive alternatives out there in both Ethernet switching and FibreChannel -- Extreme, 3Com and QLogic among them.
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Brocade CEO Mike Klayko's address to his sales team
Brocade CEO Mike Klayko's address to his sales team on the opening day of Brocade's FY10 Sales Meeting:
Perhaps in the not too distant future, Frank Quattrone will finally succeed in ending the independence of Brocade as an operating company.
Mike Klayko must be pleased that even though Quattrone was tried and found guilty of all counts and sentenced to 18 months in prison, in the end his judgement was vacated because "jury instructions were erroneous" (page 3, line 10).
Sincerely,
Brad Reese on Cisco
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