Broadcom Set to Acquire Brocade for Almost $6 Billion

**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in July-August 2016.**

Network vendor Brocade Communications Systems, a company with its own long history of acquisitions, is being acquired by semiconductor connectivity solutions company Broadcom Ltd. in a deal worth approximately $5.9 billion.

Rumors about a potential acquisition that swirled earlier this week and sent Brocade’s stock soaring, were laid to rest with today’s news.

“This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers,” stated Hock Tan, president and chief executive officer of Broadcom, in a press release. “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.”

While Broadcom’s intent is to acquire all of Brocade’s business, the company announced plans to divest of Brocade’s IP networking business, which includes an end-to-end portfolio of wireless and campus networking, data-center switching and routing, and software-networking solutions that span from the network edge to the data center.

This basis for this move is because Brocade’s IP portfolio conflicts with the IP portfolios of some of Broadcom’s largest and most valuable customers, according to the company.

While Brocade CEO Lloyd Carney says the company wasn’t looking to be acquired, the Broadcom deal was too good to pass up.{ad}

“When Broadcom approached us with a compelling offer, we had an obligation to consider that offer, along with other alternative opportunities. After careful consideration, we concluded that Broadcom’s offer was in the best interests of our company and its shareholders. Our goal is to continue to serve our customer and partner needs,” he wrote in a blog.

Brocade just closed on its acquisition of Ruckus. According to comments released by Broadcom, it’s too early to say what the outcome of this acquisition will be and that additional information will be provided in the near future. In the meantime, Broadcom and Brocade will work together to plan for a smooth migration of processes, partner support, and customer delivery once the acquisition closes. However, there are some aspects of the integration that may be put on hold upon review, Broadcom added.

Brocade has a broad ecosystem of partners including channel partners such as VARs, solution and service providers, and value-added distributors in its Brocade Partner Network; global system integrators, OEMs, cloud service providers, and technology alliance partners.

The strategy going forward for Brocade’s IP partners is …

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… to wait and see, and depends on the sale of the IP portfolio. Whether current Brocade channel partners will be able to sell Broadcom products is also yet to be determined.

Broadcom’s intention is to continue to deliver the “market-leading” storage networking solutions and innovation for which Brocade is so well known.{ad}

By combining with Broadcom, we believe we can further strengthen our OEM and partner ecosystem and help more customers meet the next-generation network and storage requirements that are likely to emerge in this era of digital transformation.

The deal is expected to close in about a year.