Brocade shares jump on deal talk; Polycom seen as deal target on Cisco buy; OpenTV bid opens

By Cristal Cody

Tupelo, Miss., Oct. 5 - Shares of Brocade Communications Systems, Inc. jumped on Monday on media reports the data storage equipment maker is seeking a buyer.

Although the company does not need a deal, industry consolidation is likely behind the move, an analyst told Prospect News.

Meanwhile, Polycom, Inc. became the second company mentioned as a potential takeover target after Cisco Systems, Inc. announced its acquisition of Tandberg ASA, an analyst said Monday.

In other situations, the Kudelski Group said it would pay about $215 million in its second attempt to buy out the remaining outstanding class A shares of OpenTV Corp.

On Wall Street, stocks reversed last week's losses and closed up on Monday.

The Dow Jones Industrial Average added 112.08 points, or 1.18%, to close at 9,599.75.

The Standard & Poor's 500 index closed up 15.25 points, or 1.49%, at 1,040.46, and the Nasdaq Composite index rose 20.04 points, or 0.98%, to 2,068.15.

Brocade rumors spark interest

Brocade's stock closed up $1.44, or 18.82%, at $9.09 on Monday.

"We believe there's still pretty good upside from here," Erik Suppiger, an analyst with Signal Hill Group LLC, said in an interview Monday. "We could see it getting well in the double digits."

Several companies were cited on Monday as potential bidders for San Jose, Calif.-based Brocade, including Hewlett-Packard Co., International Business Machines Corp., Dell Inc. and Juniper Networks, Inc., Suppiger said.

"I don't think there's any need to sell itself right away, but I imagine prospective buyers are talking to them because there's consolidation going on," he said. "This landscape is changing, and you're going to see networking technologies like what Brocade offers converge with other solutions out there as well as professional services organizations."

Brocade spokesman John Noh told Prospect News on Monday that the data storage networking solutions company "does not comment on rumors and speculation."

Shares of Palo Alto, Calif.-based Hewlett-Packard added 79 cents, or 1.74%, to close at $46.07.

Armonk, N.Y.-based IBM shares rose 73 cents, or 0.61%, to $119.75.

Round Rock, Texas-based Dell's stock closed up 11 cents, or 0.73%, at $15.15, while Juniper shares gained 53 cents, or 2.05%, to $26.38.

Cisco casts long shadow

San Jose, Calif.-based IP-network developer Cisco said Thursday it will acquire Norwegian video conferencing company Tandberg for about $3 billion. The deal caused immediate concerns for Tel Aviv-based Radvision Ltd., a major videoconferencing supplier for Cisco.

The acquisition also makes Pleasanton, Calif.-based Polycom, Tandberg's videoconferencing market competitor, a "clear takeover target," Krisztian Szentessy, an analyst with Pali Capital Inc., said in a research note released Monday.

"A strategic buyer could pay $28-$30 per share, depending on the level of synergies which could be extracted," Szentessy said.

Privately held business communications firm Avaya Inc. is the most likely bidder but may not have the funds because the New Jersey company bought a portion of bankrupt Nortel Networks Corp. in September, Szentessy said.

Because of Polycom's "scarcity value, as the only remaining independent player in videoconferencing, we would not rule out a strategic premium," Szentessy said. "In our view, offering a broader product portfolio has become more and more important in the unified communications space."

Polycom's stock closed at 26.94, up 8 cents, or 0.30%.

Radvision shares climbed 11 cents, or 1.88%, to $5.96.

Cisco shares rose 27 cents, or 1.19%, to $22.94.

Tandberg shares rose 0.58% to close at 156.60 Norwegian kroner.

OpenTV shareholder makes offer

Kudelski launched the tender offer for OpenTV shares on Monday for $1.55 per share, which represents a premium of 17.2% to the stock's closing price of $1.33 on Friday.

Switzerland-based Kudelski said the offer gives "OpenTV shareholders immediate liquidity at a superior value to OpenTV's future prospects, particularly given OpenTV's current scale and R&D challenges and the significant amount of new investment required for OpenTV to remain competitive as a standalone, publicly traded company."

The tender offer expires on Nov. 6.

Kudelski and its subsidiaries already own about 13.4% of the digital television software maker's outstanding class A shares and all of OpenTV's outstanding class B shares. The holdings represent 32.3% of the total outstanding shares and 77.2% of the voting power of OpenTV.

Kudelski said it has not asked OpenTV's board to approve the tender offer, and the deal does not require the approval or recommendation of the company's board. Kudelski had offered $1.35 a share earlier this year for the company, but OpenTV's board rejected the bid.

San Francisco-based OpenTV said in a statement sent Monday to Prospect News that shareholders are urged to carefully review all documents Kudelski files with the Securities and Exchange Commission.

"OpenTV was not involved with the formulation of the matters discussed in that release," the company said. "We otherwise have no comment at this time."

OpenTV shares closed up 21 cents, or 15.79%, at $1.54 on Monday.

Mentioned in this article:

Brocade Communications Systems, Inc. Nasdaq: BRCD

Cisco Systems, Inc. Nasdaq: CSCO

Dell Inc. Nasdaq: DELL

Hewlett-Packard Co. NYSE: HPQ

International Business Machines Corp. NYSE: IBM

Juniper Networks, Inc. Nasdaq: JNPR

OpenTV Corp. Nasdaq: OPTV

Polycom, Inc. Nasdaq: PLCM

Radvision Ltd. Nasdaq: RVSN

Tandberg ASA Oslo: TAA

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