In an October 11 research note titled “Castles in the Air, Downgrading to Perform,” Oppenheimer & Co analyst Ittai Kidron throws cold water on expectations that Brocade will be bought anytime soon.

The speculation began last week, after The Wall Street Journal reported that Brocade was “quietly” shopping itself, and that Oracle and Hewlett-Packard could be potential buyers.

Later, Reuters reported more details: Brocade had in fact been trying to sell itself for several weeks, and HP had kicked the tires — going as far as to begin due diligence — but stopped short of making an offer for the company because they were only interested in certain assets. Then, Oracle CEO Larry Ellison publicly said his company wasn’t about to buy Brocade. Apart from HP and Brocade, analysts have speculated that IBM and Juniper Networks could also be interested.

Oppenheimer’s Kidron explains why Brocade might have trouble finding a buyer:

Brocade’s shares have risen sharply following WSJ reports the company has put itself up for sale. We, however, don’t anticipate a near-term acquisition. We view Brocade’s data center switching as the prime jewel, and it’s unlikely prospective buyers would pay a hefty premium for it solely.

Kidron then lists each potential acquirer and tells you why those companies won’t pick up Brocade. His comments are in quotes:

• HP: “Risks losing substantial revenue given Brocade’s OEM exposure and material overlap with ProCurve. Only needs a data center switch.” In other words, HP might lose the revenue that comes from Brocade’s partnerships with companies that sell its products. Also, HP and Brocade already make some similar gear.
• IBM: “Return to hardware business unlikely.” IBM has transformed itself from a hardware seller to a global services giant and we heard last week that IBM had decided not to look at Brocade’s books, although that could change.
• Oracle: “Publicly denied interest.” Anyway, Oracle is waiting to get regulatory approval from the European Commission to proceed with its acquisition of Sun Microsystems.
• Juniper: “Overlap with Foundry and too big to swallow.” Juniper is the No. 2 maker of network gear after Cisco and buying Brocade would add scale to its business, but would potentially bring integration challenges given Juniper’s size.
• Dell: “A wild card but busy with Perot acquisition ($3.9B), limiting bandwidth.” Dell might agree with that (see below).

Dell’s Vice President of Enterprise Storage and Networking Praveen Asthana stopped by the Reuters office Monday morning, and here’s what he had to say about acquisitions: “We don’t want to overextend ourselves at any time.” Yes, Dell is more acquisitive now than it has ever been, but the PC and server computer maker still wants to focus single-minded on integration and implementation after it has bought a company, so “we wouldn’t want to do three large acquisitions at the same time. The main goal that we have is successful implementation. I’m sure we don’t want to add too many big ones at the same time.”

Kidron’s conclusion?

Given the M&A hurdles and premium Brocade is likely to demand, we’re doubtful of a deal near term. As such, we would take profits at current levels and are downgrading Brocade to Perform.

So far, Brocade shares haven’t reacted much. They were up 0.9 percent at $9.50 in early afternoon Nasdaq trading. Clearly, the market is still holding out hopes of a deal for Brocade, whose shares have risen about 24 percent since before news of its potential sale.

(Additional reporting by Ritsuko Ando. And yes, that’s a picture of a model wearing a brocade gown, courtesy Reuters. Because it makes for a better picture than networking gear.)

Only a week to go before decision time and it looks increasingly as though Xstrata boss Mick Davis has already made up his mind and opted to walk away from making a formal bid for mining rival Anglo American.

Reuters correspondent Raji Menon quotes an unnamed top-10 shareholder in Xstrata saying: “They have pretty much indicated to us that they will be walking away”.

This makes sense – nothing has changed since Xstrata got a “put up or shut up” notice from the UK’s Takeover Panel, giving it until October 20 to make a formal offer or walk away for six months.

If Xstrata has indeed made up its mind, it should waste no time in telling investors that it has no plans to make an offer. Why wait?

Time to reap some green shoots? Private equity firm Blackstone plans to list up to eight of its portfolio companies, aiming to make more hay from improved stock markets. Rival Kohlberg Kravis Roberts & Co’s Dollar General filed for an initial public offering of up to $750 million in August, and KKR is considering others, sources previously told Reuters.

Blackstone is positioning one company — hospital staffing firm Team Health — for an IPO and evaluating the potential for seven others, a source tells us, citing a letter sent from Blackstone to investors. The letter also says Blackstone is in the process of selling five companies outright, which it sees generating aggregate proceeds of $2.8 billion.

One of the exits is Kosmos Energy’s Ghanaian oil interests, the source who has the letter said. Sources previously told Reuters that Exxon Mobil had agreed to buy Kosmos Energy’s stake in the Jubilee field. Kosmos is backed by Blackstone and Warburg Pincus.

British Prime Minister Gordon Brown plans to outline a sale of government assets on Monday aimed at raising 3 billion pounds, according to a draft speech provided by his office. The sale will be carried out over the next two years and include betting company Tote and the cross-channel rail link between the UK and France.

In other stories reported by the media on Monday and over the weekend:

British bank Lloyds has lined up a syndicate of investment banks to underwrite a 11 billion pound rights issue, the Sunday Times reports, without citing sources. The deal would be linked to Lloyds’ attempts to reduce its participation in the UK government’s toxic asset scheme.

Private equity firm Blackstone Group is planning to sell at least five companies, the Financial Times reports, citing founder Steve Schwarzman. The firm is considering listing up to eight other companies, the report also said.

Barclays is planning to spin off a 4 billion pound portfolio of complex credit assets as its presses ahead with a process to clean up its balance sheet, the Financial Times says, quoting people familiar with the matter.

Chinese state-owned metals conglomerate Chinalco does not intend to tale a stake in UC RUSAL when the indebted Russian aluminium company lists shares in Hong Kong later this year, the South China Morning Post reports. Last week a Russian newspaper had reported that Chinalco may be interested in acquiring a stake in RUSAL, citing unnamed banking sources.