Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Bye-Bye, Brocade!

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Brocade Communications Systems (Nasdaq: BRCD  ) is riding high today on buyout rumors. The Wall Street Journal's usual unnamed sources say that IT giants like Hewlett-Packard (NYSE: HPQ  ) and Oracle (Nasdaq: ORCL  ) might buy the little specialist in data storage networking, and the stock jumped 16% on that report.

There's a lot to like about Brocade. The company has a solid product portfolio. Within its niche, Brocade is a serious rival even to networking master Cisco Systems (Nasdaq: CSCO  ) . In fact, Brocade's sales weathered the storms of 2009 better than Cisco, and also outperformed storage titan EMC (NYSE: EMC  ) . And that's before you take Brocade's smart acquisition strategy into account.

After today's 16% pop, Brocade's share price has more than tripled in 2009. Even so, the stock does not look expensive by traditional metrics like price to forward earnings, and the PEG ratio is hovering right around the perfectly reasonable 1.0 mark. HP and Oracle certainly have shown that they're willing to cut the occasional deal. If Oracle's pending acquisition of Sun Microsystems (Nasdaq: JAVA  ) passes antitrust reviews in Europe, then both of the rumored buyers have large existing relationships with Brocade. Then again, so does IBM (NYSE: IBM  ) -- another cash-rich and acquisitive tech giant. However, it remains to be seen how much any of these companies want to increase their newfound rivalry with Cisco by pushing further into the networking market.

The WSJ notes that there is no deal on the table yet, but Brocade is holding a strong hand and has several potential suitors. Don't be surprised if you see an actual buyout offer in the coming weeks. And congratulations if you bought in the last time we reminded you of Brocade's strength -- you're sitting on a market-beating 42% gain today.

Is Brocade the next big buyout in tech -- or do you have even better ideas? Share your wisdom and wealth in the comments below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (0) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 999946, ~/Articles/ArticleHandler.aspx, 10/25/2016 8:10:44 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 10 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:00 PM
BRCD $8.79 Up +0.10 +1.15%
Brocade Communicat… CAPS Rating: ****
CSCO $30.46 Up +0.31 +1.03%
Cisco Systems CAPS Rating: ****
EMC $0.00 Down +0.00 +0.00%
EMC CAPS Rating: ****
HPQ $13.97 Up +0.17 +1.23%
HP CAPS Rating: ***
IBM $150.57 Up +0.94 +0.63%
IBM CAPS Rating: ****
JAVA.DL $9.49 Down +0.00 +0.00%
Sun Microsystems,… CAPS Rating: **
ORCL $38.27 Up +0.34 +0.90%
Oracle CAPS Rating: ****