Ruckus Wireless, the independent Wi-Fi vendor, is to be acquired by enterprise networking solutions provider Brocade for US$1.2 billion (£840 million). The purchase of Ruckus adds a wireless capability to Brocade’s current position as a provider of switches, routers, storage networking, network visibility and analytics, application delivery controllers, mobile networking, transceivers, network management and professional services.
It said in a statement issued today (4 April 2016) Brocade said that the combined company is expected to be: No.1 in storage area networking; No.1 in service provider Wi-Fi; No.2 in data centre networking; No.3 in enterprise wireless LAN; and No.3 in enterprise edge networking in the US and EMEA.
The companies expect the transaction, which has been approved by both companies' boards of directors, to close in Brocade's third fiscal quarter of 2016. Both firms are headquartered in California, USA.
The statement added that the acquisition will also significantly strengthen Brocade's strategic presence in the broader service provider space. Brocade expects the transaction to be accretive to its non-GAAP earnings by its first quarter of fiscal 2017. The Ruckus organisation will continue to be led by current Ruckus CEO, Selina Lo, who will report directly to Brocade CEO, Lloyd Carney.
Under the terms of the agreement, Ruckus stockholders will receive $6.45 in cash and 0.75 shares of Brocade common stock for each share of Ruckus common stock. Based on the closing price of Brocade's stock on 1 April 2016, the transaction values Ruckus at a price of $14.43 per common share, or approximately $1.5 billion (£1 billion), and may fluctuate until close.
Net of estimated cash acquired, the transaction value is approximately $1.2 billion. The cash portion of the purchase price will be funded through a combination of cash on hand and new bank term loan financing.
The acquisition removes yet another independent Wi-Fi vendor from the market, which has been slowly consolidating over the last five to six years. Trapeze was bought by Belden in 2008 and then acquired by Juniper Networks in November 2010. BelAir Networks was bought by Ericsson in February 2012, while Cisco (which had already acquired Airspec) scooped up Meraki in November 2012.
Extreme Networks was bought Enterasys, a Siemens Enterprise Communications company in November 2013. Motorola Solutions’ Wi-Fi unit was acquired by Zebra Technology in October 2014, while HP networking (which had already snapped up Calubris) acquired Aruba Networks in March 2015. Finally, Meru Networks was bought by Fortinet in July 2015.
In terms of major independent Wi-Fi manufacturers that just leaves Aerohive, Xirrus, Mojo (formerly AirTight) Networks and Cambium Neworks among the more notable players. Commenting on the deal, Shane Buckley, CEO of Xirrus (and a competitor to Ruckus) said: "This move by Brocade confirms our view that enterprise infrastructure vendors recognize the value of developing wireless capabilities as their customers migrate to mobile and embrace BYOD.
"Brocade’s acquisition of Ruckus complements its continued effort to diversify beyond data center networking into campus networks, an initiative started years ago with the acquisition of Foundry. The challenge is that Ruckus has had a rich history in the service provider market – carriers and hospitality MSPs – but is not as well known in the enterprise campus networking space.
"This deal also confirms a long-standing trend in the communication tech sectors where diversified vendors tend to make material M&A moves on sizeable targets with which they had an existing commercial partnership. This not only lowers the business combination risks, but it also provides buyer with visibility of potential revenue and cost synergies,” said Buckley.
Explaining its move to acquire Ruckus Networks, Brocade said that as companies move to digitize their business, they need an underlying network architecture that supports business agility. This new IP architecture enables the network to become a platform for innovation and for developing, delivering, and securing new applications.
Wireless is a critical access technology and the combination of Brocade and Ruckus creates a ‘new type of pure-play networking company, with solutions spanning from the heart of the data centre to the wireless network edge’.
In addition, after close, Brocade said the acquisition is expected to accelerate cross-selling activities into the respective companies' partner and customer bases, opening up new revenue opportunities for the combined company across a variety of verticals, including large enterprises, K-12 and higher education, government, hospitality, and service providers.
The acquisition will also strengthen Brocade's ability to pursue emerging market opportunities around 5G mobile services, Internet of Things (IoT), Smart Cities, OpenGtm technology for in-building wireless, and LTE/Wi-Fi convergence.
Brocade and Ruckus believe that the integration of Wi-Fi and the use of shared access or lightly licensed spectrum are critical to meeting the ever-growing demand for coverage, capacity, and consistency required for next-generation mobile services. These elements are important in Brocade's strategy to disrupt and enhance the way edge services are created and delivered.
"This strategic combination will position us to expand our addressable market and technology leadership with Ruckus' fast-growing wireless LAN products, and supports our vision to deliver market-leading New IP solutions that enable the network to become a platform for innovation," said Lloyd Carney, chief executive officer of Brocade.
"History shows that focused, pure-play companies often innovate faster, are more agile, and deliver better value to their customers. With the rapidly evolving requirements of the digital transformation era, we are positioning ourselves to lead where technology is headed. We believe that combining our portfolios will provide significant benefits to our customers and will enable us to accelerate our growth and value creation."
"The combination of our two companies will create an exciting new thought leader in networking and significant opportunities for our stakeholders to participate in the combined company's future growth potential," said Selina Lo, president and CEO of Ruckus.
"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. We are excited for the opportunity to join the Brocade team and to jointly deliver innovative, value-added solutions to our enterprise and service provider customers."