There was speculation for years that Juniper would acquire someone like Extreme or Foundry to get into the Ethernet business. But rather than hastily run into a deal, the router manufacturer took its time building its own products, releasing its EX series of switches in 2008. At the same time, Brocade diversified into Ethernet by acquiring Foundry for $3 billion.
When Brocade acquired Foundry, the Ethernet supplier was doing $165 million in revenue a quarter. In the 3rd quarter of 2008, Foundry's last as an independent company, its rival Juniper sold just $18 million worth of Ethernet switches. But during the 3rd quarter of 2010, Juniper sold over $100 million of its EX Series Ethernet switches, more than a five-fold increase in two years, while Brocade sold $122 million worth of Foundry-developed products in its quarter ended July 2010, a 25% decrease over the same period.
|BRCD's 3rd Quarter Ends in July|
While Cisco probably scared Brocade a bit when it started developing SAN-OS, now NX-OS, companies like Juniper, F5, and Riverbed have had success against the networking giant by focusing on one product category at a time, not by trying to replicate much of its product line, as Brocade is now trying to do.
Brocade really just needs to cut its losses in the Ethernet business. The $122 million it booked last quarter in "Ethernet" actually includes the ServerIron load balancer. More importantly, its gross margins for the acquired Foundry products have fallen into the mid-20s. They were in the 60s when it bought the company two years ago. Now I wouldn't count Brocade out as a company, it's been dominant for over a decade in storage networking, but while it thought it could take on Cisco, it has wound up losing to Juniper.