Brocade CEO Mike Klayko: We're not for sale

Brocade Communications CEO Mike Klayko denies the company has been for sale, says new Acadia venture between EMC-Cisco won't hurt and looks ahead to Fibre Channel (FC) technology upgrades.

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Brocade Communications Systems CEO Mike Klayko today said his company is not for sale, and has not been shopping itself.

Brocade has been the subject of acquisition rumors since an Oct. 5 story in The Wall Street Journal said the storage and networking vendor put itself up for sale. Hewlett-Packard (HP) Co. had been considered the top candidate to buy Brocade, until HP acquired 3Com Corp. instead for $2.7 billion earlier this month.

Klayko addressed the acquisition rumors publicly for the first time today on Brocade's earnings report conference call with analysts.

"We don't like to comment on rumors, we've never commented on rumors and we will continue that practice going forward," Klayko said. "However, I want to address misinformation out there that is just false. We have not, and we never did [put ourselves up for sale]. We spent the last five years planning and putting pieces in place. It doesn't make a lot of sense. I want to put that to rest right up front."

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When asked if the rumors affected Brocade's sales last quarter, Klayko said, "No, except for we got a lot of publicity out of this thing."

Another analyst asked why HP didn't buy Brocade instead of 3Com. "That's just a rumor, and one of the things we don't comment on."

Much of Brocade's focus over the past year has been on Ethernet networking as it expanded its product line and partnerships following its acquisition of Foundry Networks. Since that acquisition, Brocade's storage revenue has gone from 84% of its total revenue to 58%. But Klayko and chief technical officer (CTO) Dave Stevens said the vendor is advancing its Fibre Channel (FC) technologies for Fibre Channel over Ethernet (FCoE) and storage-area network (SAN) implementations.

"We went from 4 [Gbps] to 8 gig Fibre Channel this year," Klayko said. "We came out with a new chassis for our Fibre Channel DCX switch, an adapter extension and encryption cards. We'll continue to invest with higher density 8 gig and higher performance 16 gig switches."

Stevens said Fibre Channel is the key piece for FCoE product portfolios. "It's really all about preserving the Fibre Channel stack and carrying it over Enhanced Ethernet," he said. "The hard part of that is the storage part, not the Ethernet part. Today we're shipping an FCoE top-of-rack switch and an FCoE blade for our DCX director. We're experts in the storage space."

Klayko also said he didn't expect the Acadia joint venture between its biggest OEM partner EMC Corp. and its rival Cisco Systems Inc. to hurt sales. He said only a small percentage of customers want an integrated product such as the Vblock configurations EMC, Cisco and VMware Inc. announced three weeks ago.

"We've had a relationship with EMC for 10-plus years, and I would anticipate that relationship continuing for a long time," he said. "Customers are demanding Brocade by name in the largest enterprises."

Brocade's revenue of $522 million for last quarter was about as expected. Its storage product revenue increased approximately 5.5% from the previous quarter, close to the storage industry average of 6%, according to a note issued today by Stifel Nicolaus Equity Research analyst Aaron Rakers to clients.

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