Fibre channel storage vendor Brocade has reached agreement to acquire enterprise network vendor Foundry Networks for £1.5bn ($3bn).

The deal, expected to close in the fourth quarter of 2008, broadens Brocade's networking portfolio and will give network giant Cisco more competition, not just in the datacentre infrastructure battleground, but also in the application delivery and traffic management sectors.

"Through this deal, Brocade has now uniquely positioned itself in the networking industry to deliver a leading, alternative solutions portfolio spanning local, metro, wide and storage area networks," said Zeus Kerravala, global enterprise research senior vice president, Yankee Group.

Brocade now had the breadth and depth of offerings to be "a viable option for customers looking for complete networking solutions capable of addressing their constantly evolving and increasingly complex IT challenges," he added.

Brocade chief executive Mike Klayko, said the industry was "at an inflection point in the way enterprise and service provider networks and datacentres are being architected."

"Customers are demanding networking solutions that meet the needs for today and can address the many advances in network convergence that are still ahead."

The acquisition was prompted by the growing importance of Ethernet, suggested Quocirca principal analyst for communication, collaboration and convergence Rob Bamforth. "Ethernet is encroaching everywhere as performance and capability rises, and it's better for Brocade to buy in or take on existing technology than develop it in-house – it's more expedient for them to manage industry and technology evolution that way."

Brocade may also have half an eye on a potential convergence of fibre channel and Ethernet technology, with a move towards a standard Ethernet architecture running over optical fibre.

The Institute of Electrical and Electronics Engineers currently has plans for Ethernet with speeds of 40Gbit/s and 100Gbit/s. Fibre channel currently extends to 8Gbit/s, but the next iteration to 16Gbit/s technology will not be available until 2011, according to the Fibre Channel Industry Association's (FCIA) website.