Why Is Brocade Buying Ruckus Wireless for $1.2 Billion?

April 6th, 2016 by Mark Daly in Industry News No Comments »
Why Is Brocade Buying Ruckus Wireless for $1.2 Billion? ilicomm Technology Solutions

Networking Technology company Brocade has said its $1.2 billion acquisition of Ruckus Wireless will enable it to deliver a wider range of services that enterprises need in the digital transformation era.

The addition of Ruckus Wireless’ mobile Internet-focused systems and services will help Brocade become “a pure-play networking company that has market-leading solutions spanning from the most critical part of the data center to the wireless network edge,” Brocade CEO Lloyd Carney and Ruckus Wireless president and CEO Selina Lo said in a joint blog post announcing the deal.

Founded in 2004 and based in Sunnyvale, Calif., Ruckus Wireless has developed a number of technologies for wireless data, voice and video services. For example, last year it was the first in its industry to come out with an access point — the ZoneFlex R710 — to support Wave 2 features of the 802.11ac Wi-Fi standard.

New Market Opportunities

“History shows that focused, pure-play companies often innovate faster, are more agile, and deliver better value to their customers,” Carney said today in a statement about the Ruckus Wireless acquisition. “With the rapidly evolving requirements of the digital transformation era, we are positioning ourselves to lead where technology is headed.”

The addition of Ruckus’ offerings and capabilities is also expected to increase cross-selling opportunities for both companies and open up new vertical customers, such as large enterprises, educational organizations, government agencies and service providers.

The deal creates “significant opportunities for our stakeholders to participate in the combined company’s future growth potential,” Lo said in the statement. “We operate in adjacent segments of the larger networking market with a number of common customers for our complementary products, and have a successful track record of working together.”

Last month, Brocade announced it was acquiring the startup StackStorm for an undisclosed amount. StackStorm’s flagship product provides an event-driven automation platform for data centers.

Aimed at 5G, IoT, other Emerging Trends

Under the terms of the deal, Lo is expected to continue as the head of Ruckus Wireless’ operations and will report to Carney. The acquisition is expected to close sometime in the third quarter of this fiscal year.

“Until closing, both companies will continue to operate independently to serve our customers,” Carney and Lo said in the blog post. They added that combining the two firms “aligns very well with both companies’ mobile strategies and positions us to win in emerging opportunities like 5G services, Internet of Things, Smart Cities, and more.”

Despite the synergies the companies are touting, some analysts are speculating that Ruckus Wireless might yet see other purchase offers before the Brocade acquisition closes. For instance, in a research note, Walter Piecyk an analyst at the financial services firm BTIG, said other would-be buyers that might come forward could include Ericsson, Nokia, CommScope or Juniper.

Writing on the investment site Seeking Alpha today, Eric Jhonsa noted that the announcement strengthens Brocade’s ability to compete with rival Cisco.

He said the deal — like HP Enterprise’s acquisition last year of Aruba Networks — appears to be an effort to “gain more scale and reap M&A cost synergies in a networking hardware market where Cisco . . . remains the 800-lb. gorilla, where growth is already pressured by a mix shift in global IT spend towards Internet/cloud giants who often use white-box hardware produced by contract manufacturers, and where growth could be pressured in the future by software-defined networking and network functions virtualization.”

Image Credit: Zone Director 3000 hardware via Ruckus Wireless.

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