Is Networking Gear the Last Stand Against Commoditization in the Data Center?

datacenterBrocade’s hanging of a “for sale” sign shines the spotlight on the one area of cloud and enterprise expansion that up until now has been largely overlooked: the network. Pick your model — cloud or enterprise — and it’s clear that while the list of server vendors is long, the single-source networking choices are few and far between. And as both cloud and enterprise markets move to commodity architectures that stress scale-out server approaches using IP and Ethernet networking, the importance of robust networking infrastructure becomes even greater. In the face of this transformation, will networking remain the last piece of the data center puzzle in which brand names still matter? Read More about Is Networking Gear the Last Stand Against Commoditization in the Data Center?

Apple’s Got a War Chest of Cash

I’m not going to lie to you — this is going to get geeky. Not run-my-mac-from-the-command-line geeky, but more pocket-protector-and-green-visor geeky. I am an accountant after all. That being said, someone asked me the other day what the big deal was with Apple’s war chest.

For those who don’t know, Apple is currently sitting in Cupertino with a cool $12 billion in the bank. And if you throw short-term investments in the pot, Apple has quick access to $25 billion. That’s a TON of money — especially for a company with $32 billion in revenues. As a comparison, HP has about $15 billion in cash and $118 billion in revenues.

I began pulling Apple’s financial statements to see what I could find out about Apple’s “war chest,” as it’s being called, and found out some interesting things. But first, a quick lesson in financial ratios.
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Lexus Gives GOOD News

NTV StationNowadays, everyone who’s anyone in corporate America is throwing their advertising dollars in one of two directions: hip little branded web series or flashy heal-the-Earth projects. Hands-down successes on either front are still in the minority. But with the delightful GOOD News, luxury car company Lexus and GOOD Worldwide, the media company “for people who want to live well and do good,” have it all going on. Not only are they raising each other’s profiles with a seamlessly integrated sponsorship deal, but they’re delivering a thoughtful, informative daily news show that’s — gasp — fun to watch.

GOOD News officially launched Nov. 21, with the announcement of the Lexus sponsorship, but episodes on the web site date back as far as Oct 14, and they’re all worth checking out. Animated host Roger Numbers is the cutest balding brainiac since Dr. Bunsen Honeydew, infusing laid-back, Ira Glass-esque dryness with an impish snark Jon Stewart would envy. (And he rocks a mean polo shirt on Casual Friday.) The unmistakable NPR flavor is probably no coincidence; former Fresh Air with Terry Gross producer Ian Chillag is GOOD News’ managing editor. (I don’t know who’s responsible for the decision to adorably animate stuff like Numbers’ “I Voted” sticker and his horrified reaction to recycling humans, but I would like to buy that person a cookie.) Read More about Lexus Gives GOOD News

Brocade Buying Foundry for $3 Billion

Wow…it is turning out to be a big Merger Monday. First Roche decides to try and pick up the part of Genentech it doesn’t already own for a whopping $43.7 billion. And now there is news that Brocade, a old school storage networking vendor, is buying Foundry Networks for $3 billion. Foundry is well known for its switches and other data networking products.

Under the agreement, Brocade will pay a combination of $18.50 of cash plus 0.0907 shares of Brocade common stock in exchange for each share of Foundry common stock,
representing a total value of $19.25 (based on Brocade’s closing stock price on Friday, July
18, 2008 of $8.27). The acquisition is expected to close in the fourth quarter of calendar year 2008.

This marriage is akin to a wedding of 50-year-old divorcees — finally realizing that love would need a new meaning. Both companies came of age in the late 1990s and were stock market darlings before losing a lot of their respective fizz. Brocade made its bones as a fiber channel network provider, but lately the world of storage is moving towards high-speed Ethernet based storage. It’s a very realistic deal between two companies that are always in the crosshairs of Cisco Systems (CSCO).

“We believe the industry is at an inflection point in the way enterprise and service provider networks and data centers are being architected,” said Mike Klayko, CEO of Brocade. “Brocade has taken an important step through this acquisition in developing a networking infrastructure strategy that will serve as the foundation for capitalizing on these dynamic opportunities.” I wonder what role Bobby Johnson, CEO of Foundry, will play in the new company!

Update: An eagle eyed reader and a good friend of mine pointed out that:

1. Valuation per employee is around $3M ($3B for 1100 employees) more than the bubble days of $1-2M
2. Debt financing of $1.5B “The deal has been approved by the boards of both companies and is subject to approval by Foundry shareholders. Brocade plans to finance the deal through a combination of cash on hand from both companies and proximately $1.5 billion of committed debt financing.
3. Servicing the debt will cost around $100M (at a conservative 6.5% interest) – which will be more than Foundry’s operating income of around $82 million.

This could be start of a roll-up play in the equipment vendor space? Maybe.

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