Broadcom is nearing the final stages of its US$5.9 billion acquisition of Brocade Communications after the Federal Trade Commission gave conditional approval of the purchase on Monday.
However, the semiconductor manufacturer needed to agree to certain terms, including establishing a firewall, to remedy the FTC's "anticompetitive" concerns around competitor Cisco, according to an FTC statement.
Broadcom supplies both Cisco and Brocade with ASICs to manufacture their fibre channel switches.
The FTC said Broadcom has access to Cisco confidential business information that "could be used to restrain competition or slow innovation" in the worldwide fibre channel switches market.
The commission said Broadcom's acquisition of Brocade could hinder worldwide competition because it has "extensive access" to Cisco confidential information that could be used to "unilaterally exercise market power" or "coordinate action" with Cisco that could lead to higher prices for fibre channel switches.
Broadcom agreed to the proposed consent order that prevents the vendor from leveraging the Cisco information for any purpose other than the design, manufacturing and sale of ASICs to Cisco.
The consent order also requires that Broadcom's fibre business group, which is responsible for Cisco's fibre ASICs, to have separate facilities and separate IT systems with security protocols that allow access only to authorised individuals and "provides for other information firewall protections," according to the FTC.
Broadcom did not respond for comment by press time.
In order to assure compliance, the commission will monitor the situation for five years, a period that could be extended up to an additional five years. The FTC said competition enforcement agencies around the world had reviewed the transaction.
In November, Broadcom announced its intent to acquire Brocade with plans to divest its IP networking business.
Brocade has agreed to sell its network-edge portfolio, which includes the Ruckus Wireless and ICX Switch product families, for US$800 million to Arris International. The vendor is also planning to sell its data centre networking business to Extreme Networks for $55 million.
Additionally, Brocade is selling its Vyatta Software Platform to AT&T, while cybersecurity vendor Pulse Secure said it would buy Brocade's virtual Application Delivery Controller (vADC) business.
Broadcom's purchase of Brocade is expected to take place sometime in August, which will then set off a domino effect for the Arris, Extreme, AT&T and Pulse subsequent acquisitions.