Will Brocade's Fabric Be a Shield in 2012?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Brocade Communications Systems (Nasdaq: BRCD  ) is the current market leader in fibre channel switches, the go-to technology for cannot-afford-to-fail network switching assignments. Fibre channel storage switches are also the most profitable items in Brocade's inventory.

Brocade sells those items, and its less profitable Ethernet switches, to original equipment manufacturers like Hewlett-Packard (NYSE: HPQ  ) , IBM (NYSE: IBM  ) , and Dell (Nasdaq: DELL  ) -- though its relationship with Dell may have been compromised by Dell's acquisition of Force10 Networks last July.

Brocade's biggest competitors for those OEM sales are Cisco (Nasdaq: CSCO  ) and Juniper Networks (Nasdaq: JNPR  ) . But this coming year, the big competition among these three companies will be for market dominance in the latest technology, data center fabric switching.

So that's what Brocade's big job will be in 2012, getting into a three-way scrum with Cisco and Juniper for fabric-switching supremacy. Cisco got there first with its Nexus switch family, next was Brocade with its OneFabric, and Juniper finally brought its QFabric to market this past September.

Brocade sees cloud computing, and the fabric data center technology to make it work, as an opportunity to gives its two larger rivals a run for their money. One way the company is trying to get an edge is to make its system less proprietary. When a data center company switches over to one of these systems, it's a huge change. The less locked into a particular system, the more comfortable a company would be in taking that big gulp and writing the check.

For example, Brocade says its fabric plan is simpler than Juniper's. They both try to do the same thing: Turn the data center into just one huge virtual switch. But Juniper uses proprietary interconnects, whereas Brocade uses standard Ethernet connections. Brocade has also pointed out that Cisco's version must use its own servers hooked up to Cisco networking equipment. Brocade says its system can connect any computing gear to the network.

Brocade is coming off an up-and-down-and-up-again year, but it seems to be in decent financial shape. After acquiring Foundry in 2008, it has been paying down the debt associated with that deal. It also has about $400 million in cash and equivalents, and was able to generate $352 million in free cash flow this year.

It's going to be a tech-wide dogfight in 2012 for cloud computing dominance. To find out why this technology will have such a disruptive influence on the status quo, watch this special free video report.

Fool contributor Dan Radovsky owns shares of Cisco. The Motley Fool owns shares of Cisco Systems and International Business Machines, and has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Cisco Systems and Dell. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (4)

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: 1750132, ~/Articles/ArticleHandler.aspx, 10/28/2016 8:50:22 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 11 hours ago Sponsored by:
DOW 18,169.68 -29.65 0.00%
S&P 500 2,133.04 -6.39 0.00%
NASD 5,215.97 -34.29 0.00%

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

10/27/2016 4:00 PM
BRCD $8.68 Down -0.12 +0.00%
Brocade Communicat… CAPS Rating: ****
CSCO $30.38 Down -0.17 +0.00%
Cisco Systems CAPS Rating: ****
DELL.DL $0.00 Down +0.00 +0.00%
Dell CAPS Rating: *
HPQ $13.99 Up +0.08 +0.00%
HP CAPS Rating: ***
IBM $153.35 Up +1.54 +0.00%
IBM CAPS Rating: ****