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Brocade's New Networking Foundry

The networking world is now a little smaller thanks to Brocade buying out networking company Foundry for $3 billion. The deal creates a new end-to-end networking vendor from storage area networks (SAN) to networking switches that will compete with industry giants Cisco (NASDAQ: CSCO) and Juniper (NASDAQ: JNPR).

The deal has already been approved by the board of directors of both Brocade and Foundry. Brocade noted in a release that it expects the deal to close pending regulatory approval in the fourth quarter of 2008.

Brocade will give 0.0907 shares of its stock for each Foundry common stock share as well as an $18.50 cash payment per share, bringing the total payment to $19.25 for each Foundry share.

It is not yet clear how many staff positions will be eliminated as a result of the buyout or what role the former CEO of Foundry will take in the new firm. Foundry CEO Bobby Johnson Jr. said on a conference call with analysts that the deal was completed on Tuesday and that no decisions had yet been made about head count reductions or his role with the new company, which will be known simply as Brocade.

Brocade CEO Michael Klayko will continue as CEO of the new combined entity. "For people that don't know the history here Brocade and Foundry are more or less siblings," Foundry CEO Bobby Johnson Jr. said on the conference call.

Johnson noted that both Foundry and Brocade received their initial seed money from the same investors and that the two were like sister companies.

The Foundry name will fade out over time, though product names from Foundry will continue under the new Brocade brand.

"The company is called Brocade, but product lines will live on," Klayko said on the call. "Customers will be familiar with what they are buying, it will be one company and one brand."

Brocade's last major acquisition was storage vendor McData, which closed in 2007 for $713 million.