Brocade Puts Itself Up For Sale

NEW YORK (Reuters) – U.S. network equipment maker Brocade Communications Systems Inc (BRCD.O) has put itself up for sale and Hewlett-Packard Co (HPQ.N) is among the possible bidders, the Wall Street Journal reported on Monday, triggering a 17 percent jump in Brocade shares.

The paper, citing people familiar with the matter, also named Oracle Corp (ORCL.O) as a potential acquirer, although it added that a deal was not imminent and Brocade may not even go ahead with a sale.

Technology bankers and analysts have been saying that Brocade is an attractive target for companies such as HP and IBM (IBM.N), which are seeking to boost their presence in corporate data centers. [ID:nN30240435]

Brocade, which has a market capitalization of $3.2 billion, sells routers and switches as well as software to help companies manage data networks.

It bought Foundry Networks last year and has been expanding sales partnerships with large technology vendors such as International Business Machines Corp and Dell Inc (DELL.O) in an effort to gain market share from Cisco Systems Inc (CSCO.O).

Oracle executives were not immediately available for comment to Reuters. Brocade and HP executives declined to comment.

HP LOOKING

People familiar with HP’s strategy have said that the computer server maker is looking at both software and networking acquisitions in order to plug holes in its portfolio, especially after Cisco moved into its traditional server turf earlier this year. [ID:nN3089979]

Brocade is a top pick for HP, the sources said. Analysts have noted it needs to develop more security and “cloud” technology which enables access to software and services over the Web.

“HP has no security offering, no real cloud-enabled technology except through partnerships and no real presence in systems and network management,” one of the sources said. “It’s a no-brainer that they’re looking at all these.”

UBS analyst Nikos Theodosopoulos said on Monday that he believed HP was considering a bid for Brocade.

“More specifically, we see HP targeting growth in storage/IP (Internet protocol) networking, either organically or through an acquisition, and Brocade would satisfy both product areas,” he said in a report.

Theodosopoulos said Juniper Networks Inc (JNPR.O), another network equipment maker, could also be a potential buyer.

In an interview with Reuters last month, however, Brocade Chief Executive Michael Klayko had said he did not see a need for Brocade to merge with or acquire another company, citing the company’s expertise and partnerships.

The company expects revenue in fiscal 2009, which ends in October, to be $1.94 billion to $1.96 billion. It has also forecast revenue for the following year to rise to around $2.25 billion to $2.45 billion.

Brocade shares rose $1.30 to $8.95 in morning trade. HP shares were up 18 cents or 0.4 percent at $45.46. (Reporting by Ritsuko Ando and Anupreeta Das in New York and Ajay