Even as it puts itself up for sale, Brocade signs a wireless networking deal with Motorola. What does that tell us about the company's plans, and what should small and midsize Brocade customers do to protect themselves?
Brocade's agreement last week to join forces with Motorola to develop new wireless products may offer the data-center networking vendor a short-term solution to a potential production line hole, but it also further muddied the waters concerning Brocade's long-term future. Rumors have been circulating that the company may be up for sale, and the surrounding uncertainty is becoming a concern to small and midsize businesses.
In the highly competitive networking market, Brocade has done well recently. The firm's product line expanded through its acquisition of Foundry Networks in the fall of 2008, and that purchase seems to be working out well. In August, the company reported quarterly revenue of $493.3 million, reflecting 35% year-over-year growth.
Making Friends With Motorola
Nevertheless, like other network equipment suppliers, Brocade has been scrambling to expand its reach. Wireless has been a hot market segment, and in response, the vendor signed a joint development agreement with Motorola. As part of the strategic relationship, the twosome will collaborate on WLAN, voice-over-WLAN, mobile unified communications/fixed mobile convergence, cloud computing and wireless broadband technologies.
As a first step in their partnership, Brocade is OEMing a range of Motorola's wireless switches and dual-radio and tri-radio 802.11n access points (APs) under the moniker of the Brocade Mobility 802.11 WLAN product line. The APs integrate a WIPS sensor for 24x7 security, include a real-time location system for asset tracking, dynamically adjust to changing RF environments, and come bundled with a wireless firewall. The wireless network products can be managed from the Brocade's INM network management system, which controls the company's wired products. So for current Brocade customers, the agreement offers them the ability to easily integrate new wireless devices into their networks.
The timing of the new agreement is interesting, however. Because even as Brocade does well, its management seems to understand that the networking market is undergoing a fundamental shift. Rather than autonomous network, server, and storage systems, vendors are developing integrated devices. The change is important, because it's expected to reduce maintenance costs and lower product pricing for small and medium businesses.
Selling Networking -- And Selling Itself
Perhaps in anticipation of that change, Brocade hired The Qatalyst Group, which specializes in IT and telecom mergers, to shop the company around to potential buyers. With its robust product line, the vendor could appeal to a number of different suppliers.
Maybe the OEM agreement is a sign that Motorola is an interested party. The company was once a leading networking supplier but over the last few years it's sidelined that business in favor of its mobile phone operations. After a few recent travails, however, the vendor seems poised to go back to its roots, and Brocade would speed that process by filling several important product holes.
Plenty Of Potential Suitors
But it's not clear if Motorola in interested in Brocade in that way. And there are plenty of other potential suitors.
Software giant Oracle seems to have designs on becoming a more significant player in the data center: the company is paying more than $7 billion for Sun. Buying Brocade would provide Oracle with LAN and SAN hardware needed to provide complete data center solutions.
HP, meanwhile, already resells Brocade FibreChannel and FibreChannel-over-Ethernet (FCoE) SAN switches, so the two companies already know each other well. However, there would be some overlap between Brocad's Foundry product line and HP's ProCurve business unit. That would have to be sorted out to make a deal viable. Also, HP's wireless networking products would render Brocade's need for Motorola's devices moot, which is why that deal has sent analysts scurrying to figure out what's really going on.
A better choice might be Juniper Networks, which has experienced a lot of success in the networking market and is working with IBM to develop next-generation integrated devices. A Brocade acquisition would flesh out much of what's missing in the IBM/Juniper datacenter arsenal -- specifically, a FCoE line of switches.
IBM has the servers needed to compete in the new integrated system space, however, the company has been moving away from hardware sales to position itself as a consulting company. Although its name has surfaced as a possible Brocade buyer, it's hard to understand why Big Blue would want to get back into the network hardware market?
Another wild card is Dell. Acquiring Brocade would give Dell, which currently makes servers for the data center, more credibility in that market with minimal overlap. But just last month Dell announced it's acquiring Perot Systems for $4 billion. And like IBM, Dell seems to be moving toward the services sector rather than the hardware segment.
Brocade has been able to weather a number of market changes and provide a solid option for companies of all sizes that need networking and storage products. The company is approaching another important crossroad, one that may dramatically impact its future. So while small and midsize businesses may continue to find its products enticing, they need to be aware that dramatic changes in the company structure could soon take place -- and plan accordingly.
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See more columns by Paul Korzeniowski.
Paul Korzeniowski is a Sudbury, Mass.-based freelance writer who has been writing about networking issues for two decades. His work has appeared in Business 2.0, Entrepreneur, Investor's Business Daily, Newsweek, and InformationWeek.
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