Brocade: Seeing No Deal, Oppenheimer Downgrades

Well, maybe Brocade (BRCD) won’t be sold, after all.

Oppenheimer analyst Ittai Kidron, who has previously expressed doubts about the likelihood of a near-term deal, despite a recent WSJ report that said the company has begun seeking a buyer, today repeated his doubts - and downgraded the stock to Perform from Outperform.

“Brocade’s share have appreciated sharply following reports the company has put itself up for sale,” he writes in a research note. “We, however, see only a small likelihood of a near-term sale, for several reasons.” He also sees little chance of an earnings surprise, leaving the stock with potential catalysts.

So why no buyer? Here’s his rundown on potential bidders:

• Hewlett-Packard (HPQ): Risks losing substantial revenue given Brocade’s OEM exposure and material overlap with ProCurve line.


• IBM (IBM): Return to hardware business unlikely.


• Oracle (ORCL): Has publicly denied interest.


• Juniper (JNPR): Overlap with Foundry and too big to swallow.


• Dell (DELL): A wild card but busy with Perot acquisition, limiting bandwidth.

His advice: “We would take profits at current levels.”

BRCD today is down 13 cents, or 1.4%, to $9.28.