IBM is buying privately held data centre switching company Blade Network Technologies to expand its data center portfolio into networking and heighten competition with rivals HP, Dell and Cisco. Financial terms of the deal, announced Monday, were not disclosed. Investors in Blade include Garnett & Helfrich Capital, NEC and Juniper Networks.  

Blade specialises in Blade and top-of-rack switches that connect racks of servers to other data centre resources, such as storage arrays. IBM is an OEM reseller of Blade's switches and has been aligned with the company since 2002. IBM says 50% of its System x BladeCenter server racks currently attach to or use Blade switches.

Blade is the No. 2 vendor of 10Gbps Ethernet Blade switches for the data centre, behind HP and ahead of Cisco, according to Dell'Oro Group. Of the 762,000 fixed 10G Ethernet ports that shipped in the second quarter, 46% were from top-of-rack switches and 31% were from Blade switches, Dell’Oro notes.

Blade had a 0.9% share of the $16 billion overall Ethernet switching market in 2009, according to Dell'’Oro.

Gartner also placed Blade No. 2 in terms of port shipments of data centre Ethernet switches in 2009, with a 17.4% share of the 10 million ports shipped. Cisco was No. 1 in both port shipments (53%) and revenue share (48% of the $1.9 billion market) in data centre Ethernet in 2009, according to Gartner.

HP was No. 2 in revenue and No. 4 in port shipments. IBM was a non-player, according to the Gartner data. Blade changes that.

"Blade will help IBM better integrate networks with its systems, optimizing them for workloads that require high speed and low latency performance such as cloud computing and business analytics," said Brian Truskowski, General Manager, IBM System Storage and Networking, in a statement.

Blade also provides software to virtualise and manage cloud computing and other workloads. Its customers include more than half of the companies on the Fortune 500 across 26 industry verticals, including automotive, telecom services, education, government, healthcare, defence and finance, according to IBM.

The acquisition is expected to close in the fourth quarter of 2010.