After such a strong performance, I imagine talks of an acquisition will re-emerge and that Cisco will once again be at the top of the list of suitors. On many levels, this seems sensible to me. Not only does Cisco have the financial means to make this deal happen tomorrow, but the two companies would have obvious synergies. What's more, Brocade's ability to more than double its free-cash-flow position over the past five years makes the company hard to pass up.
Plus, Brocade would help strengthen Cisco's enterprise and cloud position, while Cisco, which has been on a recent shopping spree, could do this deal just to play defense and to keep Brocade out of the hands of EMC and possibly Oracle (ORCL).
As of this writing shares of Brocade are trading at more than $8 following a Tuesday close of $6.90. There's the obvious concern that buyers may have gotten overexuberant.
But as enterprise spending continues to recover, there's justification for the optimism. And even if there is a pullback, the chance that this stock will appreciate over time becomes greater, especially given how well management has cleaned up the balance sheet.It's going to be tough to recommend a stock that has soared to a new 52-week high. But I still see some upside potential here. Granted, the stock does not offer the safety of Cisco. But I think for investors with a high frustration thresholds and an appetite for risk, Brocade can be solid play in the enterprise storage/network segment for the next 12 months. At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV