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Tickers in this Article: CSCO, JNPR, HPQ, IBM, COMS, BRCD, RVBD, CIEN
With so many new players entering the game, competition in the network hardware space has become white hot. Traditional makers of network gear like Cisco (NASDAQ:CSCO) and Juniper (NASDAQ:JNPR) have seen the field become increasingly crowded with the arrival of such tech heavyweights as Hewlett-Packard (NYSE:HPQ), International Business Machines (NYSE:IBM) and China's Huawei Technologies. IN PICTURES: How To Make Your First $1 Million

Winner Take All
It's become a winner-take-all battle in which there are no silver or bronze medals awarded, only gold. At stake is top spot in the rapidly growing market for network hardware, which has picked up nicely in recent months in response to growing consumer demand for bandwidth-gobbling services like high-definition video on demand and high-speed websurfing via Smartphones.

Acquisitions Key to Competitive Edge
In order to secure the critical mass necessary to maintain one's competitive edge in this battle some firms have seized on the strategy of buying up the competition. Last year, Cisco concluded no less than seven acquisitions including the $2.9 billion purchase of Starent Networks Corp. Another big ticket deal in the sector is Hewlett Packard's $2.7 billion bid for rival network maker 3Com (NASDAQ:COMS). It's all part of a broader trend of increased M&A activity across the whole tech sector that industry watchers expect to grow further in 2010.

Potential Takeover Targets
Not surprisingly, all this activity has given rise to a considerable amount of speculation as to which companies are likely to be the next targets for a buyout offer. Names like Brocade (NASDAQ: BRCD) and Riverbed Technology (NASDAQ: RVBD) have been mentioned as potential targets with Juniper seen as a the likely suitor.

But Brocade's chances of playing the role of blushing bride in a potential hookup with a stronger partner fell dramatically following the release of its most recent quarterly report. While the company did manage to swing back into the black for its fiscal first quarter, guidance for the year was decidedly underwhelming, sending the shares down more than 15% following the announcement. (Learn about the controversies surrounding companies commenting on their forward-looking expectations in Can Earnings Guidance Accurately Predict The Future?)

Investor disappointment appears to be centered on the fact that Brocade's ethernet business is not growing as fast as expected. It's a market that is expected to see sales doubling to $34 billion by 2013. These projections appeared to be confirmed when Ciena (NASDAQ:CIEN) paid $769 million to acquire Nortel's ethernet assets last November. It would now appear that Brocade is losing market share and thus a chance of capitalizing on this major opportunity; a key element that's making it attractive as an acquisition.

The Bottom Line
The overnight plunge in Brocade shares reveals the high levels of risk that are inherent in speculating on takeover targets. Since developments in this arena can be fast moving and wholly unexpected, it's a strategy that's better left to the professionals.

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