Wednesday, August 23, 2006

Hit #109

McData (MCDTA) is being bought by Brocade in an all-stock transaction. The offer price, that translates to around $4.7/share is a discount of 48% to my average cost of around $9/share.

McData could have fetched a higher price, but I am happy receiving shares of Brocade which look undervalued. Brocade will itself be a target eventually, hopefully at a substantial premium, when the current options related investigations come to a close. Former Brocade executives could end up being the first to get some sentence in the ongoing options investigations.

The storage/storage-network space is consolidating at an extremely rapid space now, with very few left standing. I expect Dot Hill (HILL), Overland (OVRL), Network Appliance (NTAP), Xyratex (XRTX), Qualstar (QBAK), Western Digital (WDC), Ciprico (CPCI), Ampex (AMPX) to be all acquired in one last spurt of activity over the next 2 years.

I own Network Appliance and Western Digital stock, bought during the bear market lows, as well as Dot Hill, whose shares have dropped substantially since I bought them.

I am looking closely at Xyratex, Overland, Ampex, after recently scoring a hit with Advanced Digital (ADIC).

Previous hit - Loudeye (#108)


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