A Brocade Buy Sensible for H-P

SAN JOSE, Calif. (TheStreet) -- With acquisition talk again swirling around Brocade(BRCD Quote), the storage specialist would be an attractive target for Hewlett-Packard(HPQ Quote).

The Wall Street Journal reported that, in addition to H-P, Oracle(ORCL Quote) is also considering a purchase, but the paper said no deal is imminent. Citing people familiar with the matter, the Journal reported that Brocade could eventually decide not to complete a sale.

Brocade is certainly an appealing proposition that could spell upside for H-P investors. The storage networking firm struck a bullish tone on its recent analyst day, raising its 2010 revenue outlook, and has become something of an analyst darling.

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The storage firm, for example, already partners with a slew of big name firms such as IBM(IBM Quote), Dell(DELL Quote) and H-P.

Sun Microsystems(JAVA Quote), which is being bought by Oracle, is also a partner, although Brocade has a particularly deep relationship with H-P going back 10 years. The company even describes its Storage Area Network (SAN) products that are resold by H-P as the broadest offering of its technology on the market. Set against this backdrop, Brocade is also rumored to be forging a deal with H-P to resell its Ethernet, or IP, products.

H-P's storage business has suffered during the economic downturn, and a Brocade acquisition could provide a major shot in the arm. Revenue from the tech bellwether's Enterprise Storage and Server (ESS) division was $3.7 billion during its recent third quarter, down 23% compared with the prior year.

With H-P attempting to challenge IBM's Global Services behemoth through its acquisition of EDS, Brocade also could take the computer maker into lucrative new data center accounts. H-P also is gearing up for a tech rebound in 2010, and recently predicted that it will outpace the tech market's growth, boosted by storage, services and PC refreshes.