Broadcom snaps up Brocade for $5.9 billion

• Broadcom pays $5.9 billion 
• Says the Brocade technology will help it meet the needs of its OEM customers
• Will find new home for Brocade's IP networking business

Actually, “snaps up” is not quite right, but then “delicately grabs and carefully dismembers” is an unappealing image so we’ll go with the dramatic headline for now. Broadcom is indeed to purchase Brocade. It will keep the Fibre Channel/SAN (Storage Area Network) Switching business but divest Brocade’s IP Networking business, including the recently acquired Ruckus Wireless, say both companies in a joint statement.

Broadcom gets to strengthen itself in its core segment - enterprise storage and networking solutions serving OEM customers - and it defrays the cost of purchase by selling the rest on, thus remaining concentrated on its chosen segment and position in the value chain without offending some of its valuable customers (Cisco) by investing in technologies that compete directly.

Broadcom says it will fund the transaction with new debt financing and cash available on its balance sheet, and that it plans to divest Brocade’s IP Networking business, consisting of wireless and campus networking, data center switching and routing, and software networking solutions, “with the support of Brocade”: an interesting choice of words suggesting that this is a carefully thought through asset shuffle, probably with likely buyers of the spare bits already in the frame. Everyone’s a winner.

“This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers,” says Hock Tan, President and Chief Executive Officer of Broadcom. “With deep expertise in mission-critical storage networking, Brocade increases our ability to address the evolving needs of our OEM customers. In addition, we are confident that we will find a great home for Brocade’s valuable IP networking business that will best position that business for its next phase of growth.”