Wow…it is turning out to be a big Merger Monday. First Roche decides to try and pick up the part of Genentech it doesn’t already own for a whopping $43.7 billion. And now there is news that Brocade, a old school storage networking vendor, is buying Foundry Networks for $3 billion. Foundry is well known for its switches and other data networking products.

Under the agreement, Brocade will pay a combination of $18.50 of cash plus 0.0907 shares of Brocade common stock in exchange for each share of Foundry common stock,
representing a total value of $19.25 (based on Brocade’s closing stock price on Friday, July
18, 2008 of $8.27). The acquisition is expected to close in the fourth quarter of calendar year 2008.

This marriage is akin to a wedding of 50-year-old divorcees — finally realizing that love would need a new meaning. Both companies came of age in the late 1990s and were stock market darlings before losing a lot of their respective fizz. Brocade made its bones as a fiber channel network provider, but lately the world of storage is moving towards high-speed Ethernet based storage. It’s a very realistic deal between two companies that are always in the crosshairs of Cisco Systems (CSCO).

“We believe the industry is at an inflection point in the way enterprise and service provider networks and data centers are being architected,” said Mike Klayko, CEO of Brocade. “Brocade has taken an important step through this acquisition in developing a networking infrastructure strategy that will serve as the foundation for capitalizing on these dynamic opportunities.” I wonder what role Bobby Johnson, CEO of Foundry, will play in the new company!

Update: An eagle eyed reader and a good friend of mine pointed out that:

1. Valuation per employee is around $3M ($3B for 1100 employees) more than the bubble days of $1-2M
2. Debt financing of $1.5B “The deal has been approved by the boards of both companies and is subject to approval by Foundry shareholders. Brocade plans to finance the deal through a combination of cash on hand from both companies and proximately $1.5 billion of committed debt financing.
3. Servicing the debt will cost around $100M (at a conservative 6.5% interest) - which will be more than Foundry’s operating income of around $82 million.

This could be start of a roll-up play in the equipment vendor space? Maybe.

Updated with Statement from Amazon: Amazon’s S3 cloud storage service went offline this morning for an extended period of time — the second big outage at the service this year. In February, Amazon suffered a major outage that knocked many of its customers offline.

It was no different this time around. I first learned about today’s outage when avatars and photos (stored on S3) used by Twinkle, a Twitter-client for iPhone, vanished.

My big hope was that it would come back soon, but popular S3 clients such as SmugMug were offline for more than eight hours — an awfully long time for Amazon’s Web Services division to bring back the service. As our sister blog, WebWorkerDaily, points out:

With two relatively serious outages in the space of 6 months, some will be asking the question of why depend on S3? The answer is simple: the rates are hard to beat, especially for service that doesn’t require any sysadmin budget.

That said, the outage shows that cloud computing still has a long road ahead when it comes to reliability. NASDAQ, Activision, Business Objects and Hasbro are some of the large companies using Amazon’s S3 Web Services. But even as cloud computing starts to gain traction with companies like these and most of our business and communication activities are shifting online, web services are still fragile, in part because we are still using technologies built for a much less strenuous web.

Update: Antonio Rodrigez, founder of Tabblo, now part of HP, on his blog asks the $64,000 pertinent question:

…if AWS is using Amazon.com’s excess capacity, why has S3 been down for most of the day, rendering most of the profile images and other assets of Web 2.0 tapestry completely inaccessible while at the same time I can’t manage to find even a single 404 on Amazon.com? Wouldn’t they be using the same infrastructure for their store that they sell to the rest of us?

Update #2: Building an offline redundancy for Amazon S3 could be big opportunity, Dave Winer says.

Update #3: A reader sent me an email and asked these two questions

• Is the system designed to be fault tolerant? If yes, then how did it go down? After all they must have massive arrays and mirrors of their storage infrastructure.
• Is this a hardware failure or a software/design problem?

Random Thought: The S3 outage points to a bigger (and a larger) issue: the cloud has many points of failure - routers crashing, cable getting accidentally cut, load balancers getting misconfigured, or simply bad code.

Update/Statement from Amazon in response to our questions:

As a distributed system, the different components of S3 need to be aware of the state of each other.  For example, this awareness makes it possible for the system to decide which redundant physical storage server to route a request to.

We experienced a problem with those internal system communications, leaving the components unable to interact properly, and customers unable to successfully process requests.  After exploring several alternatives, the team determined it had to take the service offline to restore proper communication and then bring service online again.

These are sophisticated systems and it generally takes a while to get to root cause in such a situation—we will be providing our customers with more information when we’ve fully investigated the incident.  We’re proud of our operational performance in operating S3 for almost 2.5 years, and our customers have generally been pleased with the reliability and performance of the service. But any downtime is unacceptable and we won’t be satisfied until it is perfect.

Amazon S3 is used heavily by a number of services behind Amazon’s retail websites.  Those services were impacted, but the retail website did not show noticeable problems because it mostly uses cached data.

When we recently heard about the history of YouTube’s growth strategy from CEO Chad Hurley’s point of view, he described it as “hanging onto a rocket.” But an engineer’s take is always going to be a bit less rose-colored and a bit more about the terrifying situations you brained your way out of. So we were particularly interested to tune in to a talk at YouTube’s developer conference Thursday by Cuong Do, an early software engineer who’s now manager of the site’s Core Product Engineering group.

Do’s talk was titled “Behind the Scenes: A Look Into YouTube’s Infrastructure,” and he didn’t disappoint, with harrowing tales of outages; gory details about the specific languages, architectures, and tools YouTube uses; and a flow-chart level view on the way the site handles uploads and video delivery while undergoing the massive usage it sees on a daily basis.

“One of the key phrases we had in the early days was ‘These are good problems to have,’” Do said. “And after a while we’re like, ‘I’m going to kill the next person who says that.’”

YouTube promised it would post video from the talk on its site eventually, but I don’t see it there yet, so check out the version from my handheld camera.

You wouldn’t think that next year’s DreamWorks movie, “Aliens vs. Monsters” and the search for more crude would be connected, but they are — in that they both take advantage of parallel programming for multicore chips. And when it comes to multicore chips, big bucks are on the line as the chip firm or software company that figures out how to write code to take advantage of them stands to make boatloads of money.

DreamWorks signed a deal with Intel this week aimed at parallelizing some of its code running on multicore chips to enable 3-D imaging for the 2009 animated movie. It’s not the first company to work with Intel to get more out of the multiple cores now embedded in servers, but it’s a nice example of how Intel is pushing its multicore efforts beyond simply throwing a bunch of chips at a computing bottleneck.

Like other chip firms, Intel knows that to keep compute power on the rise (and customers happy) it has to not only make the hardware more powerful with multicore chips, but also teach programmers how to use them. Otherwise, multicore chips don’t reach their full potential. James Reinders, director of marketing for Intel’s developer products division, pointed out that much of the work Intel was doing with regard to multicore, including investing in software research, selling tools to make parallel programming less cumbersome and participating in standards bodies, was done to deliver more computing power — something that can no longer be done efficiently by increasing clock speeds or adding even more cores.

“Every generation of hardware offers new capabilities, and we have rewritten our software to take advantage of it over time,” Reinders said. “Multicore will inspire us to do the same thing, but it won’t be overnight.”

It’s possible that the chip companies will be the vanguards of a new style of programming, much like programmers had to learn how to program for the web, graphical user interfaces or even e-commerce applications. Paula Richards, director of IBM’s Cell systems business thinks so. The Cell processor, designed for the Playstation 3, contains nine cores and also performs better if you adapt the code to take advantage of it.

So far IBM has focused on selling the Cell processor into financial firms, hospitals, and oil companies like Spain’s Reposal Repsol, which it inked a deal with last week. Richards said IBM doesn’t just dump that hardware and run — it spends time working with clients in each vertical to build software development kits the customer can use to get the most out of the processor. Those kits work with Intel and AMD multicore chips as well, although Richards says a user won’t see the same level of improvement they would using Cell processors.

“We knew multicore was a major inflection point in the industry,” Richards told me. “Everybody realized this and the company that addresses the [ease of programming] for this technology will win.” In some ways it’s not only about making it easy, it’s about attracting the hearts and minds of developers to a certain way of coding. That’s why IBM is offering SDKs to students who want to write parallel code on their PlayStations and Intel is pushing an undergraduate curriculum for parallel programming. This is a hardware battle fought using software.

image courtesy of DreamWorks