Brocade completes McData merger and cuts jobs

Having completed the acquisition of McData, Brocade has outlined the strategy for the joint company and shed hundreds of workers

Networking storage firm Brocade completed the acquisition of McData on Monday and released its plans for the integration of the two companies.

On Tuesday morning Brocade boasted of a massive cash reserve after the shares-only acquisition of its rival and has, according to reports, also eliminated 150 jobs, out of a total McData workforce of 570. These redundancies, which may be followed by further cuts, could scupper any hopes Brocade held of enjoying a more settled period after six months of turmoil.

The $973m (£496.4m) deal was almost derailed in July last year, when it emerged that Brocade was tied up with the options scandal that has hit a lot of US IT companies. This cost Brocade its chief executive and its chief financial officer.

According to Brocade's country manager for the UK and Ireland, Paul Phillips, there is still no sign that the issue is closed. "Of course not," he told ZDNet UK. "We made an offer to settle it with the SEC [Securities and Exchange Commission] and it is still with the SEC, but they work very closely."

Brocade explained on Wednesday morning that it will terminate several McData product lines in favour of similar Brocade offerings, as there is a lot of common ground in the product lines of the two companies. The plans for the new company include a complete re-branding, the removal of the McData name and changes to the product line-up, including the complete removal of some McData products.

In the Fibre Area Network market, all six Brocade products will remain, while the McData SpectraNet is going. According to the company, products heading for the scrap heap will continue to be supported "for a minimum of five years" but will be marked as "end of sale".  These will include all McData blade server modules. The McData Application Service Module has also been marked for end of sale.

You will find a PDF outlining the changes to the Brocade/McData line-up here.

Brocade maintains that it still has a large amount of cash in the bank, $658m, after a $200m share buy-back. "We have money for acquisitions," said Phillips. The company has also launched its first joint product with both Brocade and McData engineering in it, the Brocade 7500 SAN Router. "You will see us merging products this year," said Phillips.

The merger has given the newly merged company a tight grip on the SAN switch market. Quoting figures from the specialist storage analysts, the Dell'Oro Group, based on revenue in the third quarter of 2006 Brocade had 84.2 percent of the fabric switch market, 62.7 percent of the director market and 72.7 percent of the total Fibre Channel SAN switching product market.

Brocade couldn't rule out making further redundancies, outside its McData operations. "We have no details, but there may well be," said a spokeswoman for Brocade.

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