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Brocade inks deal to buy Riverbed's virtual ADC business

Brocade says its acquisition of Riverbed's popular virtual ADC business will bolster its overall product line for moving network services from expensive hardware into more flexible software.

Brocade Communications Systems Inc. plans to acquire Riverbed Technology Inc.'s SteelApp product line and use the virtual application delivery controller to strengthen capabilities of its Vyatta network virtualization platform.

Under the agreement announced Feb. 5, Brocade will acquire the assets of the SteelApp business unit, including development and field personnel. Financial terms were not disclosed. The deal  is expected to close in the first quarter.

Riverbed will continue supporting SteelApp customers until the deal is completed. After that, Brocade and Riverbed will jointly handle support, purchase order processing and invoicing for a three- to six-month transition period, the companies said.

Brocade intends to continue selling the SteelApp line of ADCs separately and eventually integrate the technology into its Vyatta Services Platform for software-defined networking (SDN) and network functions virtualization (NFV), said Ashwin Krishnan, Brocade's senior director of product management. Riverbed is the No. 3 ADC vendor by market share, trailing F5 Networks and Citrix.

Brocade moves to software

With Vyatta, Brocade has shown an "uncommon proficiency in transitioning from a network-hardware orientation to a strategy that increasingly emphasizes SDN and NFV software," IDC analyst Brad Casemore said.

"An open question, especially after this acquisition, is to what extent Brocade will build, buy, or enlist ecosystem partners as it further pursues its Vyatta software strategy," he said.

Brocade sells an ADC today, but it has "less than meaningful market share," Krishnan said. "We're going to focus our efforts on SteelApp."

Brocade plans to "double down" on engineering resources behind the technology, Krishnan said. "They [users] should see more positive feature velocity and sales motion than what they saw before."

Riverbed is selling SteelApp to focus more of its resources on core products for managing application and network performance in enterprises' hybrid clouds, Dave Peranich, president of worldwide field operations, said in a statement.

In October, Riverbed sold its SteelStore cloud storage backup appliance technology, formerly called Whitewater, to NetApp Inc. The SteelApp sale comes two months after Riverbed was sold to private equity firm Thoma Bravo in a deal valued at $3.6 billion.

"Riverbed is consolidating its product portfolio around what it calls the hybrid enterprise, which implies a mix of hybrid cloud, mobile and legacy application workloads," Casemore said. "As a result, this is a positive outcome for both SteelApp customers and for Riverbed."

Brocade is molding its product line to serve enterprises choosing to move network functions from proprietary hardware to software running on less expensive commodity servers. The company wants a larger share of the SDN market.

Service providers embracing SDN, NFV

Within the telecom industry, the combined SDN and NFV market is expected to soar, from $500 million in 2013 to $11 billion in 2018.

Cloud service providers and telecommunication companies like AT&T and Verizon are responsible for the majority of SDN and NFV deployments today, and the acquisition puts Brocade in a better position to compete for their business, IDC analyst Nav Chander said.

"This is a good demonstration to the customers Brocade is trying to get into," Chander said.

Brocade's software-based networking products include a router and firewall obtained through the 2012 acquisition of Vyatta. The company also has a virtual private network (VPN), an SDN controller and network analytics technology obtained in the acquisition of Vistapointe last September.

ADCs essentially function as load balancers, which sit behind a firewall and in front of one or more application servers. The ADC market segment is one of the earliest to make the transition from hardware to virtualized software. The market for virtualized ADCs is growing at a 30% annual clip, compared to only negligible growth for hardware ADCs, according to research from Dell'Oro Group.

Brocade sells hardware versions of its products too. Despite the market growth in software-based network services, many companies like manufacturers prefer a mix of software and hardware in the data center, Forrester Research analyst Andre Kindness said.

"This [Brocade] is the only company that really offers that out there from Layer 2 through Layer 7 services," Kindness said.

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