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(Updates with sale price in second paragraph.)
July 20 (Bloomberg) -- Dell Inc. passed over Brocade Communications Systems Inc. to buy Force10 Networks Inc., a person with knowledge of the matter said, expanding into the Cisco Systems Inc.-led market for computer-networking gear.
Dell considered purchasing Brocade, a maker of switches for data-storage networks, and opted instead for Force10 because its technology is more advanced than Brocade’s, said the person, who asked not to be identified because the plans aren’t public. Dell, based in Round Rock, Texas, paid about $700 million for Force10, two people familiar with the matter said.
Force10 lets Dell add networking products to an arsenal that includes computers and servers. That helps it cater to customers that are building data centers, the warehouses that deliver storage and computing via the Internet. Force10, with about $200 million in sales in the past year, also may lessen Dell’s reliance on partners such as Cisco and Juniper Networks Inc., analysts at Gleacher & Co. and ISI Group said.
“Dell has not historically been a major player in the enterprise networking market,” Abhey Lamba, an analyst at ISI Group, wrote in a research note. “Given Force10’s limited reach in terms of sales coverage, Dell will be able to grow its revenues due to its size and brand name.”
David Frink, a Dell spokesman, declined to comment on Brocade. John Noh, a spokesman for San Jose, California-based Brocade, also declined to comment.
Dell rose 10 cents to $17.52 at 4 p.m. New York time in Nasdaq Stock Market trading. Brocade dropped 40 cents, or 6.4 percent, to $5.89.
Brocade has been looking for potential buyers with the assistance of Frank Quattrone’s Qatalyst Partners for the past two years, according to the person. Dell’s acquisition “most likely means Dell will not be a likely acquirer of Brocade,” Gleacher & Co. said in a report today.
Dell announced plans to buy Force10 today. Dell was advised by Evercore Partners Inc., while Force10 was advised by Deutsche Bank AG. Fenwick & West LLC was legal counsel to Force10, while Dewey & LeBoeuf LLP worked for Dell.
The deal comes as part of Dell’s announced intention to expand in data management, or hardware and software that help corporations catalog growing volumes of data.
“Instead of selling ingredients like servers and storage, we’re selling the whole data center,” Chief Executive Officer Michael Dell said on June 29. “It’s the evolution of where storage goes.”
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