Analyst sees no immediate offer for SAN vendor reportedly up for sale
Oppenheimer & Co. downgraded Brocade stock early this week, citing skepticism that the company will be snapped up anytime soon despite reportedly putting itself up for sale. And although the stock price soared following those “For Sale” reports, Oppenheimer sees only a “small likelihood” of a near term sale for a handful of reasons, spelled out in a bulletin on this week’s downgrade:
No clear/clean buyer. HP: Risks losing substantial revenue given Brocade’s OEM exposure and material overlap with ProCurve. Only needs a data center switch. IBM: Return to hardware business unlikely. Oracle: Publicly declined interest. Juniper: Overlap with Foundry and too big to swallow. Dell: A wild card but busy with Perot acquisition ($3.9B), limiting bandwidth.
What about EMC? Or Cisco?
Oppenheimer thus views Brocade shares as “vulnerable” given, in its view, the lack of catalysts. The stock is also trading at a 20% premium, leaving small upside even if a deal does emerge, the firm notes.
We view Brocade’s data center switching as the prime jewel, and it’s unlikely prospective buyers would pay a hefty premium for it solely…If a sale is not announced near term, we believe Brocade’s shares will be vulnerable to the downside.
Oppenheimer downgraded the stock to perform from outperform.
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