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
, could do this deal just to play defense and to keep Brocade out of the hands of EMC and possibly
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
This article was written by an independent contributor, separate from TheStreet's regular news coverage.