Broadband services

Arris Bags Ruckus Assets in $800M Deal

Capping off a stellar quarterly earnings report, Arris overshadowed its own good news with the announcement that it plans to acquire both Ruckus Wireless and the ICX Switch business from Brocade for $800 million in cash "plus the additional cost of unvested employee stock awards."

The deal is contingent on the sale of the rest of Brocade Communications Systems Inc. (Nasdaq: BRCD) to Broadcom Corp. (Nasdaq: BRCM), a transaction that is expected to close in late spring or early summer. (See Arris Picks Up Ruckus & ICX Switch for $800M.)

Ruckus and the ICX Switch business would both give Arris Group Inc. (Nasdaq: ARRS) access to new markets, opening up revenue opportunities particularly in the enterprise sector. Light Reading first speculated on a deal for the Ruckus assets back in November. CEO Bruce McClelland said at the time that getting into the managed wireless space would likely require an acquisition.

Ruckus is a nice fit because of its expertise spanning unlicensed and licensed wireless tech, and because it potentially gives Arris greater leverage with service provider customers, in addition to entry into the enterprise market. (See Arris CEO Hints at Wireless M&A – Could Ruckus Be a Target?)

Stay tuned for more coverage and analysis of the deal from Light Reading in the coming days.

Want to learn the latest on cable's wireless ambitions? Sign up now for Light Reading's Cable Next-Gen Technologies & Strategies event on March 21-22, at the Curtis Hotel in
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Looking back to 2016, Arris closed out a better-than-expected fourth quarter with non-GAAP revenues totaling $1.78 billion and non-GAAP net income coming in at $0.79 per diluted share. Analysts had predicted around $1.7 billion in revenue for the quarter and an earnings-per-share number of $0.70.

Unfortunately for Arris, the good news in Q4 came at the expense of a weaker forecast for the first quarter of 2017. McClelland said he expects a recovery in Q2, but the news was enough to send Arris' stock price tumbling after hours. Shares reached $30.76 at market close, but dropped as low as $26.67 later in the evening.

Among the highlights in the Arris earnings report, executives noted that sales of video set-tops and the company's E6000 CCAP hardware were both strong, and that demand for DOCSIS 3.1 gear and second-generation line cards for the E6000 should further boost business later in 2017. Arris plans to continue investing in several network areas, particularly with regard to distributed access network technology and the development of a virtual CCAP solution.

Also of note, revenues for Arris were on the upswing in large part in 2016 because of the acquisition of Pace. That transaction was completed in January of last year. (See Pace Packs Big Punch for Arris.)

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

bosco_pcs 2/23/2017 | 4:43:02 PM
Re: Very interesting acquisition! If memory serves, Brocade bought Ruckus for the latter's 5G property. Now that Broadcom is going to take the former out, chances are they are going to have a clean slate.

Arris is facing a bit of uncertainty on the set top box front so any time it could pick up Ruckus plus ICX, it might be a good bet (note: perhaps msilbey has a typo, $1.2B instead of $1.2m :)!) 

Before its inversion with Pace, Arris has always been a growth by acquisition shop, so its Ruckus deal should not be so alarming

Probably Wall Street is focused on the next Q disappointment alone. Incidentally, Arris provides a >1 book-to-bill, so if true its business is not about to fall off the cliff.

msilbey 2/23/2017 | 9:18:20 AM
Re: Very interesting acquisition! Agreed on points 1 and 2. And Ruckus has a history with Arris/Motorola, so the culture shock will hopefully be mitigated.

On the last point, yes, $800 million is a lot of cash, but I note that Brocade bought Ruckus less than a year ago for $1.2 million. I don't know enough about the finances to understand the valuation, but on the surface it sounds like a good deal. Will dig to learn more.
[email protected] 2/23/2017 | 7:29:13 AM
Very interesting acquisition! A few points:

- Very interesting move by Arris - shows ambition and willingness to invest significantly in a converged future

- Some clarity for Ruckus - these folks have been batted around the park in the past year - they know at least (if all goes tro plan) where they will be come late H2 2017.

- I wonder of the stock took a double whammy hit from lower Q1 firecast and the size of the M&A agreement? It's hard to tell but I imagine that may have also added a bit of downwards pressure.

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