Brocade Strikes $1.2 Billion Deal for Ruckus Wireless -- Update
April 04 2016 - 4:06PM
Dow Jones News
By Don Clark and Joshua Jamerson
Brocade Communications Systems Inc. agreed to buy Ruckus
Wireless for about $1.2 billion, the latest in a series of moves by
network-equipment companies to expand their Wi-Fi offerings.
The deal, which values Ruckus at $14.43 a share, caused that
company's stock to jump 32% to $13.20 a share. Brocade's stock fell
14% to $9.15.
Brocade, based in Sunnyvale, Calif., was originally known for
networking hardware used in data storage applications. But the
company has branched into other networking segments, including
routers and switches sold in competition with the likes of Cisco
Systems Inc.
Ruckus, also based in Sunnyvale, specializes in Wi-Fi gear used
by companies and public venues. Its chief executive, Selina Lo, is
one of a small number of female CEOs of publicly held tech
companies.
The growing popularity of Wi-Fi has triggered other deals in the
sector. Cisco, for example, in 2012 agreed to buy Meraki Inc. for
$1.2 billion. Hewlett-Packard Co. in March 2015 announced a deal to
buy Aruba Networks Inc. for about $3 billion; that business is now
part of Hewlett Packard Enterprise Co. since the H-P breakup.
Lloyd Carney, Brocade's chief executive, said those two deals --
and the prospect of competing against companies with expanded
product lines -- helped prompt the decision to buy Ruckus. He said
the acquisition will help Brocade compete with the two larger
companies without worrying partners that sell computing and storage
products in competition with them, like International Business
Machines Corp. and Dell Inc.
"Our larger partners like the fact that they know we're never
going to be in their business," he said. "They know where our swim
lanes are."
Ruckus went public in 2012 at a price of $15 a share. After an
initial run-up, the stock has traded considerably below that.
Dan Rabinovitsj, its chief operating officer, said his company
wasn't looking to be acquired. But he said the company's board
responded favorably to the price Brocade offered.
In the combined company, Ms. Lo will lead the Ruckus
organization and report directly to Mr. Carney.
The companies expect the transaction to close in Brocade's third
fiscal quarter of 2016.
Brocade will pay about $1.5 billion in total, before deducting
cash and investments held by Ruckus. That company's stockholders
will receive $6.45 in cash and 0.75 shares of Brocade for each
share. The transaction price may fluctuate until close, the
companies said.
Ruckus on Monday raised the lower end of its profit and revenue
forecasts for the first quarter. The company said it now expects
adjusted profit of 9 cents to 10 cents a share on revenue in the
range of $98 million to $101 million.
In February, the company had issued guidance for first-quarter
profit of 8 cents to 10 cents a share on revenue of $96 million to
$101 million, according to FactSet.
The company also now expects adjusted-operating margin in the
range of 9% to 11%, compared with prior guidance of 8.5% to
11%.
Brocade said it had increased its stock-repurchase program by
$800 million, bringing the total remaining amount authorized under
the program to about $1.7 billion. That move was meant to
facilitate the repurchase of all shares issued in conjunction with
the Ruckus acquisition
--Ryan Knutson contributed to this article.
Write to Don Clark at don.clark@wsj.com and Joshua Jamerson at
joshua.jamerson@wsj.com
(END) Dow Jones Newswires
April 04, 2016 15:51 ET (19:51 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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