This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

It's Time for Brocade to Sell and Cisco to Buy

Instead, I think a company like Cisco should step forward and close a deal. Aside from the fact that Cisco has the financial means to make this happen, it would certainly produce some good returns considering Brocade has more than doubled its free-cash-flow position over the past five years.

A deal like this would not only help strengthen Cisco's enterprise and cloud position. It would also be a good defensive play to keep Brocade out of the hands of other possible buyers, such as EMC, Hewlett-Packard and even Dell.

Furthermore, Brocade continues to be underestimated when it comes to its technical approach to the cloud. The company has taken a slightly different approach toward organization and deployment. It understands that networks must be cloud-optimized at every critical point because companies will weigh application performance and, even more importantly, the end-user experience.

Though it lacks the history of both Cisco and Hewlett-Packard, Brocade does have a strong tradition in both data and storage networking. From that standpoint, the company could even be attractive to a buyer like Oracle (ORCL), though that is a long shot.

Bottom Line

As long as Brocade continues to trade at these levels, buyout rumors are certain circulate. To its credit, the company continues to perform in a tough economic environment and in the face of fierce competition. That said, it remains a challenge to consider the stock attractive - even at under $5, because its P/E is twice that of market leader Cisco and three times Hewlett-Packard.

As enterprise spending continues to recover, there is a chance that Brocade will begin to see its stock price appreciate a bit more. But it stands to reason that the bigger names within the sector will put increased pressure on smaller names like Brocade to capture parts of the market. That's unless, of course, they have not already decided that they want Brocade for themselves.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

At the time of publication, the author held no positions in any of the stocks mentioned.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
DELL $0.00 0.00%
BRCD $10.71 0.00%
CSCO $26.00 0.00%
EMC $24.96 0.00%
HPQ $28.03 0.00%

Markets

Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs