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Feds ask for more details on merger

Published October 4, 2006 at midnight

Data-storage company McData Corp. and bigger rival Brocade Communications Systems Inc. said U.S. regulators requested more information about their proposed $713 million marriage.

Analysts expect Brocade's purchase of Broomfield-based McData ultimately will get the federal thumbs up, despite the Federal Trade Commission's request for additional information and documents. The deal was announced Aug. 8.

Similarly, San Jose, Calif.-based Brocade said in a statement it still expects to close on the deal "as early" as the first quarter of its 2007 fiscal year, which ends Jan. 27.

"Brocade intends to respond promptly to the request and will continue to work closely with the FTC as it conducts its review," the company said in a statement.

John Francis, an antitrust attorney at Davis Graham & Stubbs in Denver, said such "second requests" for additional information are "pretty broad requests" for such material as internal documents about the deal.

"It usually takes months to respond," he said.

Brocade is the largest company in the market for switches used to connect computer storage systems and computer servers. McData is the No. 2 player.

The merged company will go head-to-head against tech heavyweight Cisco Systems Inc., which recently entered the market for data-storage switches.

The merger of Brocade and McData is expected to produce layoffs at both companies, particularly McData.

Brocade and McData have said they expect the deal to produce about $100 million a year in "synergies" through job cuts and other savings.

At the time the acquisition was announced in early August, McData's work force totaled about 1,460, with about 570 employees in Colorado, mainly Broomfield.

McData Corp.

MCDT: Nasdaq

$5.13

- 14 cents

Brocade

BRCD: Nasdaq

$7.56

- 20cents

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