Brocade to Acquire Rhapsody Networks

Brocade yesterday announced an agreement to acquire privately held switch manufacturer Rhapsody Networks. Through the acquisition, Brocade says that it will extend its leadership in the by delivering the industry’s first open, intelligent platform for fabric applications.

“We are pleased to announce the acquisition of Rhapsody Networks. The powerful combination of Rhapsody’s advanced technology and talented engineering team, coupled with Brocade’s market leadership, installed base, experience, and partner ecosystem will further solidify Brocade’s position as the reference platform of choice and accelerate the next phase of the SAN market’s evolution,” said Greg Reyes, Brocade Chairman and CEO.

As the result of the acquisition, Brocade expects to deliver to market a new class of intelligent fabric application switches, which will be fully interoperable with its SilkWorm family of Fibre Channel fabric switches. Brocade estimates that the first fabric applications based on these platforms will be available from specific OEM partners by the end of calendar year 2003.

Continued Reyes, “Through this open, intelligent platform for fabric applications, SAN customers will be able to centralize data management by integrating fabric applications into their existing environments, while protecting their investment in Brocade SAN infrastructure. The intelligent platform will provide our OEM and application partners with an increased market opportunity for new revenue from innovative fabric-based applications.”

Under the terms of the acquisition, Brocade will acquire all outstanding shares of Rhapsody in exchange for 23.4 million shares of Brocade common stock. This represents approximately 10 percent of outstanding common stock as of November 5, 2002. Based on the closing price of Brocade stock as of November 4, 2002, the deal will be valued at approximately $175 million.

Market response to the deal was cool, with Brocade stock getting four downgrades over the course of the morning of 11/6. The deal was announced after markets had closed on the 5th. At the time of writing, Brocade stock was down just over a buck a share, or almost 14% since the start of the day.