BrocData Cleared for Takeoff

The Federal Trade Commission has signed off on the merger of Brocade and McData, clearing the way for the Fibre Channel switch vendors to take on Cisco.

The companies announced late Tuesday that the FTC has closed its antitrust review of the proposed merger and that the waiting period under the Hart-Scott-Rodino Act has expired. The vote was 4-0, with one commissioner abstaining, according to Reuters.

The merger had been held up over concerns that the combined company could dominate the Fibre Channel switch market with roughly a two-thirds market share.

Cisco’s entry into the market and rapid growth created pricing pressures on its competitors, and McData’s market share has steadily eroded in the last few years. The EMC spinoff, which once dominated the high-end FC switch market, even faced pricing demands from its one-time corporate parent.

“It’s about time the government finally wrapped up their prolonged investigation and cleared the Brocade and McData deal to close,” said Greg Schulz, founder and senior analyst at StorageIO, who himself worked for InRange before it was acquired by CNT and then McData. “The longer this was in limbo, the more impact it had on customers and McData as well as Brocade employees and their futures.”

Schulz noted that the market still has three FC switch vendors, with QLogic moving aggressively into the space. “On the FICON side, ironically we are back to two vendors, Cisco and Brocade, both of whom were not in the original line up of FICON vendors, which was InRange and McData,” he said.

For extension products, Cisco, Adva, Brocade, Nortel and Ciena offer open systems products, and Ciena, Nortel, Cisco, Brocade, Bus-Tech, Luminex and others offer mainframe products, said Schulz.

ESCON might be a competitive concern, he noted, but added that “specialty vendors may be able to step in for those who have not yet migrated to FICON.”

“While the potential is there for prices to go up … market conditions and vendor competition will keep things lively and affordable,” said Schulz. “My concern would be more around loss of skills and talent to support legacy technologies that may have already left McData or been lost in the shuffle.”

“Now is the time for the combined Brocade and McData to rally around their customers and smother them with service and support, lest they lose them to Cisco, QLogic or someone else,” he said. “Brocade needs to act fast to roll out its story and plan how they will service and support customers and partners, how they will support existing products, and what they will be doing moving forward.”

Special meetings for both Brocade and McData shareholders will be held tomorrow, and the deal is expected to close on Monday.

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