AH pop on this
blogs.barrons.com
June 1, 2011, 5:47 PM ET.
Dell Should Buy Brocade, Says Canaccord
By Tiernan Ray
Canaccord Genuity’s Paul Mansky this afternoon writes that “now is the time” for Dell (DELL) to make a push into networking in a more concerted fashion, and that Brocade (BRCD) could be a target.
Dell owns three pieces of the emerging data center, storage, servers, and services, but aside from simple switching, it lacks a real computer networking offering.
There’s an urgency to fill that gap, writes Mansky, as Dell’s PC business is at the mercy of the tablet market’s cannibalization of PCs. But Dell has had success cross-selling Ethernet switching. With a shelf registration for $3.5 billion in debt, filed today, and with $7 billion of net cash on the books, Dell can do a deal.
Mansky thinks Brocade could be the ticket. He has a Buy rating on Brocade shares, and a $10 price target. Brocade has 70% of the fibre channel storage networking market, which has a high return on investment and should be a cash cow for the next five years. The other likely candidate, Juniper Networks (JNPR), gets most of its revenue from carriers, not enterprise, and is therefore not as good a fit. (Not to mention Juniper has an $18 billion market cap, Brocade, just $3 billion.
Dell shares closed down 48 cents, or 3%, today at $15.60. |
