Brocade Communications Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Brocade Communications Systems (NAS: BRCD) jumped from a slight loss to a 10% gain midday on buyout rumors.

So what: Reuters is reporting that Brocade has received a first round of bids from potential private-equity buyer, according to an unnamed source. Reports are that the company hired Qatalyst Partners as an investment banker to initiate the sale process.

Now what: So far, these reports are just rumors, but the market reacted strongly, sending shares straight higher midday. If you buy shares on this news, I would buy based on fundamentals and not rumors. Rumors can wind up being false or a deal can fall apart, leaving investors holding the bag after a run-up like this. Until the company confirms or denies reports, this Fool is staying put.

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At the time thisarticle was published Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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