Brocade CEO Stepping Down – Paving the Way for a Sale?
Brocade (NASDAQ; BRCD) recently announced its CEO, Michael Klayko, is leaving the post after more than seven years. The company, which for the last few years has been working hard to entrench itself as a leader in the Ethernet fabric space, also has been hanging a big “For Sale” sign hanging since about 2010. Could Klayko’s departure finally stir some interest in Brocade? More importantly, how will his departure impact its channel?
First, a little background: Klayko joined Brocade in 2003 after the company acquired Rhapsody Networks, where he was president and CEO. In 2005 he was named CEO. In 2008, Brocade acquired Foundry Networks, maker of Ethernet switches, as a way to expand its reach and provide a more complete data center solution. “This gives us the opportunity to provide industry-leading networks on either side of the server, from LAN to WAN, from the Internet to the heart of the data center,” Klayko said of the acquisition.
However, to date Brocade has failed to gain the mindshare in the Ethernet space enjoyed by its main rival, Cisco Systems (NASDAQ: CSCO). In December 2009, the company put itself up for sale, but as yet has found a buyer despite other acquisitions in the space — the most notable being Dell’s acquisition of Force10.
Speculation is Brocade’s asking price was too high, and indeed according to one report private equity firm Blackstone Group LP in February ended talks to buy Brocade because the price was too high for a leveraged buyout. Now that Klayko is stepping down, Brocade could have the chance to lower its price (think: no golden parachute) and make itself more attractive to buyers.
But what of its channel in all this? Even before the company put itself up for sale, Brocade has done much to ensure its channel partners are well-taken care of — former Brocade channel chief Barbara Spicek, for one, was adamant that Brocade offer educational courses for its channel partners free of charge. New channel leader Regan McGrath is continuing down the path Spicek paved, and so far Brocade seems as dedicated to its channel as it has been.
Of course, how Brocade’s channel partners are impacted once it is sold will have much to do with who’s doing the buying. A company such as Hewlett-Packard (NYSE: HPQ) or even Cisco — both of which have firm roots in channel — actually might help Brocade’s channel partners gain more traction. A VC firm could keep things status quo. At this point, it’s anyone’s guess, and it’s something we’ll revisit when the “For Sale” sign is covered by a “Sold” banner.