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A merger by two medium-sized players forms a network equipment company that hopes to challenge the mighty Cisco

The IT industry is a land of giants and dwarfs; a handful of super-corporations throw their weight around while countless start-ups nip at their heels. To be stuck somewhere in the middle is to live in constant danger of attack from either side.

July 2008 saw a bid by two of the medium-sized players in the network equipment industry to combine their weight as Brocade agreed to acquire Foundry Networks for $3 billion.

Brocade specialises in data centre networking equipment - primarily switches for zapping data around storage networks - while Foundry's expertise lies in switches and routers for Internet-based networking.

In terms of revenues, Brocade will still be a far smaller company than industry colossus Cisco Systems, however. Last year, Brocade earned revenues of $1.2 billion, while Foundry took just $607 million. Cisco, meanwhile, banked $34 billion, more than 15 times that combined total.

“We cannot provide assurance that we will be able to compete successfully against Cisco,” Foundry warned investors in its 2007 annual report. Now after sharing just under $3 billion plus one Brocade share for every 10 Foundry shares, those investors will be hoping that is the last time they read that statement.

Micrsoft's warehouse plot

Meanwhile, in the software sector, the giants are doing most of the buying. Microsoft continued to annex large parts of the business intelligence sector with its agreed acquisition of data warehousing appliance and software vendor DATAllegro for an undisclosed sum.

DATAllegro, a US-based company that shipped its first product in 2005, is one of a small band of data warehousing companies that have rocked the sector with an appliance approach. With deal sizes typically in the $1 million to $3 million range and customers usually installing 25TB-100TB systems, the company reported revenue growth of 330% in its fiscal 2007.

The company customises commodity hardware to operate in harmony with its software in order to achieve higher performance at a lower cost than traditional data warehousing vendors.

This combination of a giant's size and DATAllegro's ability to disrupt is likely to have far reaching ramifications for the rest of the data warehousing vendors, just as Microsoft's encroachment into the data analysis and reporting space has caused a rolling wave of consolidation there.

Further reading

MERGERS AND ACQUISITIONS JULY 2008
Progress in the SOA market
Progress Software pulls together the independent SOA infrastructure industry

MERGERS AND ACQUISITIONS JUNE 2008
VMware brings automomic computing closer to reality
Plus, Accenture reveals the breath of its vertical divisions

MERGERS AND ACQUISITIONS MAY 2008
Consolidating WAN acceleration
WAN optimisation pioneer falls to independent upstart as market attracts heavyweights