Brocade CEO Hints at Future Acquisitions

Brocade reports first quarter fiscal 2015 revenue as CEO explains why his company acquired Riverbed's SteelApp business.

By Sean Michael Kerner | Posted Feb 20, 2015
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Brocade has announced one planned acquisition so far in 2015, but it might not be its last, as the company continues to find ways to grow.

Brocade reported its first quarter fiscal 2015 financial results on February 19, with revenue coming in at $576 million for a 2 percent year-over-year gain. Revenue growth was not uniform across Brocade's two key market segments. SAN revenue was reported at $353 million, which is flat year-over-year, while IP networking product revenue was reported at $133 million for an 11 percent year-over-year gain.

During Brocade's financial analyst call, CEO Lloyd Carney discussed his company's planned acquisition of Riverbed's SteelApp business unit. Brocade announced its intention to acquire the SteelApp business on February 5. SteelApp is a virtual Application Delivery Controller (ADC) technology platform.

Brocade has not publicly disclosed the acquisition price for SteelApp, though that didn't stop financial analysts from speculating on the call. One analyst pegged the acquisition price at $30 million, which Carney did not confirm or deny.

"We have not given the acquisition price for the transaction," Carney said. "The transaction hasn’t closed yet and we’ll have more information when the transaction is actually closed."

Ken Cheng, Chief Technology Officer and Vice President of Corporate Development at Brocade, did provide some additional detail on the call about Brocade's SteelApp plans. He said that the Brocade's existing ADX ADC platform and the SteelApp product sets and roadmaps will eventually consolidate.

Carney noted that in his view, the SteelApp product line was not strategic to Riverbed, but it will be for Brocade.

"This fits really well into our overall software defined networking strategy," Carney said. "As the shift goes from hardware to software based, we have the kind of team that knows how to sell this, and we’re going to focus on it. We bought it because it is strategic to our vision."

Brocade plans to make more acquisitions in 2015

The SteelApp acquisition might not be the only acquisition that Brocade makes in 2015.

"Leveraging our strong financial position, we continue to make thoughtful, incremental acquisitions that add value to our technology portfolio," Carney said. "Going forward, we expect to make additional strategic investments that extend our leadership in emerging technologies for cloud, social, mobile and big data."

Brocade's Whitebox Competition

Another key area that Carney addressed was that of whitebox open networking. The movement toward whitebox networking is being driven largely by the Open Compute Project and has vendors, including Cumulus Networks, pushing it forward.

Carney specifically noted that the market that Cumulus addresses is not the core market that Brocade is going after. Carney added that he expects the new IP architecture to be a combination of both white box and existing infrastructure.

"We do find customers who are going to deploy white boxes, and we have capabilities of Vyatta running on white boxes," Carney said.

Sean Michael Kerner is a senior editor at Enterprise Networking Planet and InternetNews.com. Follow him on Twitter @TechJournalist.

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