Brocade to buy Foundry for US$3 billion

Storage networking company Brocade Communications Systems has agreed to acquire enterprise LAN vendor Foundry Networks for approximately US$3 billion, the companies announced Monday.

Brocade said the deal will make it a top provider of networking gear for enterprises and service providers, by allowing it to offer a full line of products that extends from the Internet to wide- and local-area networks and into the data center.

The deal has been approved by the boards of both companies and is expected to close in the fourth quarter, pending approval by Foundry's stockholders and other closing conditions, Brocade said.

Brocade will pay US$18.50 in cash plus about one-tenth of a share of Brocade stock for each share of Foundry, for a total of US$19.25 per share. Brocade expects to fund the deal with cash from both companies and US$1.5 billion of debt financing.

"Our business models and technologies are extremely synergistic," Marty Lans, Brocade senior director of product management for data center infrastructure, said in an interview. Foundry has "the best technology and the broadest set of features," he said.

The companies do not expect to make layoffs following the deal, he said.

Foundry was founded in 1996 and has about 1,100 employees. It posted its preliminary second-quarter financial results Monday. Revenue was US$160.7 million, up from US$143.2 million in the same quarter last year. Net income was US$18.3 million, up from US$15.6 million.

(James Niccolai in San Francisco contributed to this report.)