Brocade exits network adaptor business

Brocade had included the expected impact of this transaction in the two-year non-GAAP financial model presented at its September analyst day. At that time, Brocade said it would be exiting certain lines of businesses that generate approximately $80 million to $100 million in annual revenue; the adapter business is a part of that revenue total.

At the same time, Brocade laid off 300 workers to hone its focus on SDNs.

This divestiture includes the entire Brocade network adapter line:

• Brocade 1860 Fabric Adapters;
• 815/825 and 415/425 Fibre Channel Host Bus Adapters;
• 1010/1020 Converged Network Adapters;
• HBA and CNA mezzanine adapters for select OEM partners.

Brocade and QLogic did not disclose the financial terms of the sale, citing non-materiality for either company’s business. Brocade also did not disclose the annual revenue of its adapter business but said it was “relatively small.” QLogic and Emulex are the leading storage area network adapter companies in the market.

According to Dell’Oro Group, the Fibre Channel SAN adapter business is in decline, impacted by Fibre-Channel-over-Ethernet and Cisco’s FCoE-equipped UCS blade server systems, as well as softness in the high-end server market due to outsourced IT and virtualisation. Fibre Channel adapter revenue was only $133 million in the third quarter of 2013, with standalone adapter revenue realising year-over-year declines in eight out of the last nine quarters, according to Dell’Oro.

Brocade and QLogic will collaborate on the development of the next generation Gen 6 Fibre Channel technology, and build up its partnership efforts around Fibre Channel, Brocade stated in its announcement of the divestiture. Brocade said “a small number” of Brocade employees will be given offers to join QLogic but the company is not disclosing the actual number.

“This transaction continues the execution of our business strategy, which will further enable Brocade to focus on core networking technologies in the data centre in order to better serve our customers and partners and to drive better value for our shareholders,” said Ken Cheng, CTO and Vice President, Corporate Development and Emerging Business, Brocade. “This transaction also benefits our customers through the two companies firmly committing to the success of the current Gen 5 Fibre Channel technology as well as Gen 6 technology, which is now in development.”

Brocade said it will provide an update during its first quarter fiscal year 2014 earnings call in February.