Networking components maker Brocade Communications (NASDAQ:BRCD) has long been seen as a potential buyout target. Other networking specialists have been snapped up by the large conglomerates at the top of the IT food chain, to the point of saturation. And Brocade still sits on the sidelines.
Maybe that's about to change. After a short search for a new CEO, Brocade has settled on former Xsigo and Micromuse chief, Lloyd Carney. The guy just happened to sell his last two companies. Oracle (NYSE:ORCL) bought virtualized storage start-up Xsigo for an undisclosed sum last year, and IBM picked up data management expert Micromuse for $850 million seven years ago, bolstering its own Tivoli toolkit.
So Carney has recent deal-making experience, knows how to work out a big-ticket deal, and has connected with two of the industry's largest players already. And here he sits at the controls of a hot networking commodity in search of a larger purpose. The puzzle pieces are coming together, and I think they spell "buyout in 2013."
Oracle looks like the most likely suitor, given Carney's very recent wheeling and dealing with Larry Ellison's empire. Oracle also happens to need more networking expertise if it wants to measure up to the increasingly complete portfolios of Cisco Systems and, yes, IBM.
Hewlett-Packard (NYSE:HPQ) could also make a quick deal, because the fallen giant is desperate for a real success story. But HP already bought 3Com and 3PAR to fill that role, and there are no 3s in Brocade's name. Perhaps more to the point (though you never know -- HP's bumbling board of directors is fully capable of basing major business decisions on silly details), 3PAR did pretty much everything Brocade does, so it's a redundant idea.
Only time will tell, but I really do believe that Oracle will buy Brocade this year. My thumbs-up CAPScall on the stock will reap the rewards of that buyout premium.
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