Brocade says that its $1.2 billion deal to buy WiFi company Ruckus will greatly strengthen its overall wireless and service provider offerings, while developing its virtualized mobile position and helping to pivot towards 5G in the future.
Brocade Communications Systems Inc. (Nasdaq: BRCD) said Monday that it will acquire Ruckus Wireless Inc. for approximately $1.2 billion in cash and shares. Ruckus stockholders will receive $6.45 in cash and 0.75 shares of Brocade common stock for each share of Ruckus common stock. The deal is subject to regulatory agreement and is expected to close by the end of Brocade's fiscal third quarter 2016. (See Brocade to Buy Ruckus Wireless.)
Brocade claims that the combined company will be number one in carrier WiFi in the US and Europe. Brocade CEO Lloyd Carney also suggested on a call with analysts Monday morning that the deal is intended to better position the company for a wireless future that combines WiFi and cellular in the enterprise and beyond. (See Brocade: 5G Is More Than Just an Air Interface.)
"This was the missing link for us; the on-ramp to the world's data centers is mobile," Carney said. "The interesting component that Ruckus had -- that the other wireless providers didn't have -- was their focus on the cellular networks ... They've figured out that the line is blurring between LTE, 5G and WiFi, and they have a product portfolio and strategy that firmly addresses that."
Initially, the deal will build on the pair's existing WiFi partnership of nearly two years' standing. For instance, Ruckus CEO Selina Lo -- who will lead a new wireless unit at Brocade -- suggested on the call that one benefit for enterprise customers will be "greater integration" between 802.11ac WiFi and wired switches as the latest enterprise WiFi upgrade cycle happens.
"We can hit the ground running," she said on the call.
Brocade's CEO, however, returned to the cellular strength that the purchase brings to Brocade several times:
"The hidden gem for us here is her [Lo's] strength and her positioning around LTE and the fulcrum she has there," Carney said said on the call. "If you talk to [Brocade VP of Worldwide Sales] Hank King in our service provider group, he's one of the happiest guys in the world today because he now has this strong service provider product piece to go and sell in the wireless space."
Heavy Reading Senior Analyst Gabriel Brown is also focused on how the deal will push Brocade further in wireless. He notes that it even gives Brocade a route into small cells through its "OpenG" 3.5GHz spectrum program. (See Ruckus Packs Wi-Fi & LTE Into Small Cells.)
"It fits a pattern in that Brocade has been making smaller acquisition to broaden its service provider portfolio with VistaPoint for analytics and Connectem for virtual EPC," Brown tells Light Reading. "Ruckus is a bigger deal financially and, of course, it pushes Brocade into wireless access and, to an extent, licensed small cells." (See WiFi: Small Cells' Trojan Horse?)
Ruckus's Lo was asked on the call if any other companies have been talking to the 12-year-old company about a possible acquisition besides Brocade. She didn't address the question, stressing the synergies with Brocade instead.
"With Brocade, we have found the best value for our investors." Lo said.
Heavy Reading's Brown notes that it is "probably a good time" for Ruckus to sell as larger companies crowd into the enterprise WiFi sector: "Aruba was acquired by HP last year and with Cisco the market leader, you can see there is pressure on independent WiFi vendors."
— Dan Jones, Mobile Editor, Light Reading