Brocade Communications Systems Inc. said it plans to buy data equipment maker Foundry Networks for around $3 billion to expand its product line, customer reach and sales channels.

Brocade, which makes data-storage network switches, said it would pay $18.50 cash plus 0.0907 Brocade share for each Foundry share, valuing the company at $19.25 per share, or a 41 percent premium over Foundry Network's Monday closing price of $13.66.

Brocade would raise $1.5 billion in debt and pay $1.4 billion in cash and the rest in equity, it said.

In after-hours trade, Brocade shares fell 16 pct to $7 while Foundry shares rose 33 pct to $18.15.

Brocade said the deal, expected to close in the fourth quarter of calendar 2008, was more about growth than cost savings, and that it would help them offer a broader range of networking technologies to support increasing Web traffic.

Both companies compete with much larger Cisco Systems Inc , which offers a wide range of routing, switching and other networking equipment.

"I think customers want more integrated solutions," said Tom Buiocchi, Brocade's vice president of worldwide marketing.

By: DocMemory
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