Challenging Cisco, HP in data center switching market, IBM acquires Blade Technologies

Sept. 28, 2010
IBM announced that it intends to acquire Blade Network Technologies, a privately held Santa Clara company whose technology routes data to and from servers in data centers.

Frank Michael Russell of the San Jose Mercury News reports that on Monday, IBM announced that it intends to acquire Blade Network Technologies, a privately held Santa Clara company whose technology routes data to and from servers in data centers. Financial terms of the deal weren't disclosed, but IBM said it expects the acquisition to close in Q4.

As Russell reports:

"IBM is bolstering data-center offerings as rivals such as Hewlett-Packard and Oracle expand in corporate computing. Blade Network makes switches that connect servers, storage and networks in data centers, large rooms of computers that handle corporate tasks. It's the third acquisition IBM has announced this month, after a $1.7 billion deal for storage-analytics maker Netezza and a purchase of software maker OpenPages for an undisclosed sum."

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"The move may help IBM compete as rivals increasingly tie networking gear with data centers. Cisco Systems, the world's largest maker of networking equipment, last year released its first blade servers, pushing into the data-center market and pitting it against Hewlett-Packard and IBM. In April, HP bought 3Com for $2.7 billion to bolster its data-center networking."

"Blade's technology is used by more than half the Fortune 500 companies."

"According to a June report by Gartner, Blade competes with much larger rivals, including San Jose-based Cisco, which had 47.8 percent of the $1.9 billion data center switching market in 2009. Other companies in the market are HP, based in Palo Alto, and Sunnyvale network-equipment maker Juniper Networks, an investor in Blade."

"'Today's news is a very good outcome for our customers, and for the hardworking employees of Blade,' Blade CEO Vikram Mehta said in a blog post on the company's website.

"Blade was spun off from Nortel Networks in 2006. In addition to Juniper, Blade's investors include San Mateo buyout firm Garnett & Helfrich Capital and NEC, according to TechCrunch."

"In a note Monday to clients, Ticonderoga Securities analyst Brian White said the deal would benefit Juniper."

"'This deal may increasingly allow IBM and Juniper Networks to work more closely in the networking domain,' White wrote in an e-mail. 'As IBM expands into the networking world, we would not rule out the possibility of Juniper Networks combining forces with IBM.'"

"Juniper confirmed the deal will strengthen its relationship with IBM."

"'This will enable us to collaborate more closely when our products and services are deployed together,' the Juniper statement said. 'All three companies are aligned in our commitment to addressing customers' most challenging connectivity needs for next-generation data center networks.'"

"Juniper's stock surged $1.25, or 4.2 percent, to close Monday at $31.03. IBM finished at $134.65, up 54 cents, or 0.4 percent."

SOURCE: San Jose Mercury News

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