Ahead Of The Bell: Brocade Falls On HP-3Com Deal

NEW YORK (AP) — Shares of Brocade Communications Systems Inc. fell in premarket trading Thursday as analysts said the the maker of networking gear would be hurt by Hewlett-Packard Co.'s acquisition of 3Com Corp.

HP's deal, worth $2.7 billion, was announced after the markt closed on Wednesday.

Lazard Capital analyst Ryan Hutchison said the deal dims the prospect of a partnership between HP and Brocade for corporate networking equipment. The acquisition of 3Com will fill "most of the holes" in HP's networking portfolio, he wrote in a research note.

Hutchison downgraded Brocade's shares from "Buy" to "Hold."

The shares fell $1.07, or 12 percent, to $8.18 in premarket dealings.

ThinkEquity analyst Rajesh Ghai also downgraded the shares from "Buy" to "Hold."

Jefferies & Co. analysts led by Munjal Shah kept their "Buy" rating on Brocade. The acquisition of 3Com puts an end to speculation that HP might buy Brocade, they noted, but they believe that Brocade "remains a very strategic asset for someone looking to expand their presence in the data center networking segment."

Brocade's fundamentals are also improving, they wrote. They kept a $11 price target.