April 28, 2009

IBM, Brocade Form New Distribution Deal Against Rival Cisco

Brocade Communications Systems Inc, a network equipment maker, is forging a new distribution deal with ally IBM Corp for Internet routers and switches in a move that will make the company a bigger competitive threat to rival Cisco Systems Inc, The Associated Press reported.

Both companies plan to announce on Tuesday that IBM will re-brand Brocade products with the IBM logo and push them out through IBM's sales force.

Such arrangements are common among technology companies, in which the smaller one (Brocade) gets access to better distribution and the bigger one (IBM) gains access to products it didn't spend money manufacturing.

For over a decade now IBM has resold Brocade products in this way, including switches that connect servers and data storage machines.

However, that partnership will now expand even further as IBM will resell the Internet routers and switches that Brocade picked up as part of last year's $3 billion acquisition of the small Cisco rival Foundry Networks.

The announcement comes as a major move for Brocade as it benefits from IBM's reputation while stepping up its attacks on market leader Cisco.

Dave Stevens, Brocade's chief technology officer, said the IBM brand obviously carries tremendous value.

An official statement from IBM noted that the expansion of the agreement with Brocade is about giving customers more choices, adding that it continues to work with Cisco and that the two companies have a strong relationship.

But Cisco is now expanding aggressively after growing into one of Silicon Valley's most prominent companies by selling behind-the-scenes computing products. Cisco announced in recent weeks that it would start selling servers, opening a new rivalry with longtime partners like Hewlett-Packard Co. and IBM.

IBM stopped making its own routers and switches when the company sold that intellectual property to Cisco in 1999.

Some analysts say Brocade is a potential takeover target by IBM or other large technology companies.

Brocade Chief Executive Michael Klayko declined to comment on that possibility, but said he was satisfied with the current relationship with IBM.

"Essentially I've been married to them for over a dozen years, and we have a very, very good marriage," Klayko said.


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