Foundry Networks, Inc. (NASDAQ: FDRY), which builds networking technologies, went public in 1999. With the Internet surge, the stock price went over $200.Of course, that was a temporary thing. Since then, Foundry's shareholders have suffered.
However, this week they got some cheery news. Foundry agreed to sell out to Brocade (NASDAQ: BRCD). The deal comes to about $2.91 billion in a combination of cash and stock.
Essentially, the deal blends some key technologies. While Brocade has a strong footprint in fiber channel systems, Foundry is a top player in switches and 10-gigabit Ethernet offerings.
If anything, it's a necessary step to deal with the intensely competitive environment, especially against the mighty Cisco (NASDAQ: CSCO).
No doubt, Brocade has demonstrated success with M&A, such as with its acquisition of McData. However, networking deals can be tricky. After all, Brocade operates primarily on an OEM basis whereas Foundry has a large direct sales force.
There is some financial risk too as Brocade needs to borrow about $1.4 billion.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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