Arris Bidding for Brocade Unit – ReportArris Bidding for Brocade Unit – Report

Just a year after gobbling up Pace for $2.1 billion, Arris is now reportedly bidding to buy Brocade's networking equipment business for up to $1 billion.

In a story late Friday, Reuters reported that Arris Group Inc. (Nasdaq: ARRS) is one of several companies angling to acquire the networking unit of Brocade Communications Systems Inc. (Nasdaq: BRCD), which is now being bought by Broadcom Corp. (Nasdaq: BRCM) for $5.9 billion. If carried out, such a deal would enable Arris to boost its presence in the wireless equipment market, which it has targeted as a hot "adjacent" area for expansion. It would also enable Broadcom to get rid of a unit that competes directly with some of its biggest customers, such as Cisco Systems Inc. (Nasdaq: CSCO). (See Broadcom Buys Brocade for $5.9B, Will Ditch Ruckus & IP Biz.)

All three companies have declined to comment on the reported talks so far. But Broadcom has announced publicly that it intends to sell off Brocade's networking business as part of a planned divestiture of Brocade into three separate units. Most of the assets of Brocade's networking unit, which makes WiFi controllers and access points, were obtained by that company when it acquired Ruckus Wireless for $1.5 billion earlier last year. (See Brocade Revenue Climbs on Ruckus Acquisition, But Earnings Fall Hard.)

Arris is coveting the wireless market at least partly because its main cable customers are seeking to make a bigger mobile play. For instance, both Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. , the two biggest MSOs in the US, have declared their intent to expand their wireless businesses dramatically in the coming year. (See Arris CEO Hints at Wireless M&A – Could Ruckus Be a Target?)

Following the Reuters report, Arris's share price closed Friday up 52 cents, or 1.78%, to $29.71 on the Nasdaq Exchange. The US stock markets are closed today for the Martin Luther King Day holiday.

— Alan Breznick, Cable/Video Practice Leader, Light Reading