Brocade's proposed $3 billion acquisition of Foundry Networks this week would create a stronger data center competitor to Cisco while raising the stakes even higher for other Ethernet switch companies.

Brocade, the market leader in Fibre Channel storage-area network (SAN) switches, says combining itself with Foundry will create an end-to-end alternative for next-generation data centers unifying Fibre Channel and Ethernet. (Compare SAN switches.)

"Brocade has said that they will introduce a router that will allow the routing of Fibre Channel over Ethernet (FCoE) for both Fibre Channel and Ethernet SANs," says Deni Connor, principal analyst at Storage Strategies Now. "But they haven't had a lot of experience in IP/Ethernet-centric technology. They really needed more Ethernet experience." See: Brocade’s Foundry buy will boost Fibre Channel over Ethernet market

For Foundry, the deal gives it a unified data center fabric play to dovetail with its high-performance Ethernet switching portfolio for data centers. It also creates a more formidable competitor to Cisco for ownership of the FCoE market, though analysts believe Cisco won't feel much pressure from it. 

(View our slideshow of 2008's hottest tech merger and acquisition deals.)

"We do not believe that this development poses any material implications to Cisco's LAN switching business for the time being," states Ryan Hutchinson, vice president, Data Networking & Infrastructure, at Lazard Capital Markets in a bulletin on the deal. "We believe any strategic gains from having footholds in storage, LAN switching, and carrier routing are likely long-term-focused and incremental gains will likely be immaterial to Cisco."

The more intriguing implications of the union will be to the rest of the Ethernet switching market. Cisco's 70%-plus market share dwarfs that of other players -- Nortel, HP ProCurve, Force10 Networks, Extreme Networks, Enterasys Networks and new entrant Juniper, among them. This deal leaves them further behind, observers note.

"I've been a little disappointed in the rest of the vendors' lack of movement towards the whole concept of a unified fabric," says Zeus Kerravala, senior vice president of enterprise research at The Yankee Group. "I just get the feeling that the rest of the industry, they're like a bunch of little kids with their hands over their ears screaming, 'I don't hear you' when you talk about this trend. It's coming."