Internal woes rock Brocade, but Rhapsody buy expected to help

Some industry insiders suggest that Brocade's acquisition of Rhapsody Networks is to blame for a lot of its recent woes, including layoffs, executive resignations and a drop in its stock prices.

There has been a brouhaha at Brocade Communications Systems Inc. in recent weeks -- the acquisition of a startup company, falling stock prices, a round of job cuts and the exit of four top executives.

Earlier this month, Brocade loosened its purse strings and shelled out a whopping $175 million for storage switch maker Rhapsody Networks Inc. of Fremont, Calif., in order to fill a gap in its technology portfolio around virtualization.

John Webster, founder and senior analyst of the Data Mobility Group Inc., Nashua, N.H., said Rhapsody's technology is a replacement for a product, dubbed V Switch, that Brocade was developing but never formally announced.

The V Switch technology was slated to be an application module in the storage fabric that would provide virtualization capabilities.

However, it remains to be seen whether Brocade can make its technology acquisition work in a timely fashion, Webster said.

"There's a big time lag between acquisition and product re-release. It could give competitors time to recover," Webster said.

Last week, Brocade's president and chief operating officer, Mike Byrd, announced his resignation, citing a desire to spend time with his family. Byrd's resignation was preceded by the departures of Morris Taradalsky, vice president of engineering and chief technology officer; Rich Geruson, general manager and vice president of global services, solutions and alliances; and Jeff Brooks, vice president of marketing.

Also last week, the company announced layoffs -- 12% of its total workforce.

The rumor mill is churning full force and some in the industry have questioned the timing of these events, hinting that the Rhapsody acquisition is to blame.

Steve Duplessie, founder and senior analyst at Enterprise Storage Group Inc., Milford, Mass., said that's not the case.

Duplessie said after a long run atop the switch market, Brocade needed to reassure customers that, with the competition heating up and market dynamics shifting, it had a strategic vision for the future.

"Brocade cruised along really well for a long time based on the fact that they were the anointed one," he said. "Now the market is shifting to a maturing model and Brocade needs to get out and create demand, as opposed to just waiting for the OEMs to do so."

He said Brocade needed an application services platform to augment its own product line.

"With Cisco talking the talk and Sun buying Pirus [Networks] for $165 million, [Brocade,] in order to remain the market leader, had to get into the game," Duplessie said.

The holes left in Brocade's upper management are soon to be filled by staff that came on board through the Rhapsody acquisition. Duplessie said Rhapsody's founder Dave Stevens, president and CEO Mike Klayko, and Tom Buiochi, vice president for marketing, will slide into the vacant positions.

"I think [Brocade CEO Greg] Reyes needed to clean out some "yes men" and get ready to face the next battle. I don't think [the] Rhapsody [acquisition] had anything to do with this decision, but if it did, Brocade picked up some really good talent in the exchange," Duplessie said. "All in all, I'd say Brocade picked up more than it lost."

According to Steve Daheb, software product marketing director for Brocade, the acquisition of Rhapsody will accelerate its time to market for virtualization and serve as a platform for new fabric-based applications.

Brocade declined to comment about other companies that "may or may not have expressed interest in acquiring Rhapsody."

As a result of the acquisition, Brocade expects to deliver a new line of fabric application switches, which it said would be fully interoperable with the Brocade SilkWorm family of Fibre Channel fabric.

Rhapsody's switch architecture is multifaceted. It hosts fabric applications directly and supports multiple protocols, including Fibre Channel and IP, which are accessed through an open API. Brocade said the API would be integrated with the Brocade Fabric Access API to deliver a complete interface for the development of storage and data management applications.

Brocade has not announced a specific time frame for product delivery.

Let us know what you think about the story; e-mail Kevin Komiega, News Writer

FOR MORE INFORMATION:

Brocade buys Rhapsody Networks, plans new switches

Brocade income dips, CTO resigns

Brocade debuts 32-port FC switch amid missed fourth-quarter mark

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