Wheelings & Dealings: Brocade Plans Big Buy of Ruckus Wireless

By Steve Anderson April 04, 2016

Network service provider Brocade recently made a move to step up its Wi-Fi operations, purchasing Ruckus Wireless for around $1.2 billion in a mix of cash and stock. It was a move that met with mixed reaction from the market, and one that may not offer much value for Brocade for a while.

Brocade offered Ruckus shareholders around $14.43 per share, a move that sent Ruckus shares on an upward trend, reaching about 30 percent gain at one point. Ruckus shareholders were to get a combined stock / cash price of $6.45 per share and 0.75 common stock shares of Brocade. The deal was reportedly valued at around $1.5 billion after cash acquired had been factored in, and is expected to close by the end of July.

Seemingly in response, Brocade shares dropped over 14 percent on Monday morning trades. The share prices did recover off the lows on Monday, at least for a while, but the price was still down off the open. A separate report suggested that the deal would add to Brocade's adjusted earnings by the first quarter of fiscal 2017, and Ruckus' operations would continued to be led by current Ruckus chief executive officer (CEO) Selina Lo, who would now report directly to Brocade's CEO Lloyd Carney.

It's odd that the market would respond in such fashion. Brocade now has the ability to offer expanded Wi-Fi services to its customers, and given that Brocade is a fairly major name in networking, having that extra service to offer should be regarded as a value point. It might be that the market figures Brocade overpaid; some reports suggest Brocade paid a premium of 44 percent for Ruckus shares, and that could be seen as Brocade shelling out too much cash for too little return. It also may not be exactly welcome that the deal really won't start contributing much to the bottom line until sometime in the next fiscal year, potentially making some think that Brocade not only overpaid, but overpaid for a system that wouldn't offer much turnaround in rapid fashion.

This is largely speculative, of course, based on what's currently known. Still, Brocade may well have the last laugh here as it uses its new acquisition to make a current customer base happier, and bring in new customers to match.




Edited by Maurice Nagle

Contributing Writer

SHARE THIS ARTICLE
Related Articles

Pai Makes His Case for Title II Repeal

By: Paula Bernier    11/21/2017

FCC Chairman Ajit Pai today made clear his plans to repeal Title II net neutrality rules. The commission is expected to pass his proposal at its Dec. …

Read More

Mist Applies AI to Improve Wi-Fi

By: Paula Bernier    11/9/2017

Mist has created an AI-driven wireless platform that puts the user and his or mobile device at the heart of the wireless network. Combining machine le…

Read More

International Tech Innovation Growing, Says Consumer Technology Association

By: Doug Mohney    11/8/2017

The Consumer Technology Association (CTA) is best known for the world's largest trade event, but the organization's reach is growing far beyond the CE…

Read More

Broadcom Makes Unsolicited $130B Bid for Qualcomm

By: Paula Bernier    11/6/2017

In what could result in the biggest tech deal in history, semiconductor company Broadcom has made an offer to buy Qualcomm for a whopping $130 billion…

Read More

How Google's 'Moonshot' Could Benefit Industrial Markets

By: Kayla Matthews    10/30/2017

The term "moonshot" encapsulates the spirit of technological achievement: an accomplishment so ambitious, so improbable, that it's equivalent to sendi…

Read More