Brocade, a major player on the NFV and SDN scene in the wireless industry, announced it plans to purchase Wi-Fi equipment company Ruckus Wireless in a deal valued at around $1.2 billion. The companies expect the transaction to close in the third quarter of this year, and Ruckus CEO Selina Lo will remain in the combined company and will report to Brocade CEO Lloyd Carney.
"The acquisition will strengthen Brocade's ability to pursue emerging market opportunities around 5G mobile services, Internet of Things (IoT), Smart Cities, OpenG technology for in-building wireless, and LTE/Wi-Fi convergence," The companies said in a press release announcing the agreement. "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."
Founded in 1995, Brocade is a major player in the storage area networking and data center networking segments, and currently counts roughly 4,700 employees worldwide and annual revenues of around $2 billion. In recent years, the company has worked to expand its position into the wireless industry by selling SDN and NFV technologies to wireless carriers. For example, in December 2014 AT&T added Brocade, Ciena and Cisco to its "Domain 2.0" initiative, which is designed to drive SDN and NFV adoption in the company's network as part of its virtualization drive. Today, AT&T is currently running traffic from "millions" of its wireless customers over its SDN architecture, according to John Donovan, senior EVP of AT&T's technology and operations.
And just this year, Brocade announced a new "mobility building platform and vision," according to CEO Carney, that the company said will help mobile operators prepare for 5G. The company demonstrated the offering at the recent Mobile World Congress trade show.
Ruckus, for its part, supplies Wi-Fi services and equipment to enterprises and service providers, counting annual revenues of almost $400 million and more than 1,000 employees. Importantly, the company's products power a number of public Wi-Fi installations, such as New York City's LinkNYC effort. At the recent MWC show, Ruckus showed off its OpenG technology that the company said combines coordinated shared spectrum, such as 3.5 GHz in the U.S., with neutral host-capable small cells to enable building owners to deploy cost-effective in-building cellular coverage. Ruckus plans to drive the market adoption of OpenG using its enterprise channel and service provider base.
"We expect the acquisition to be accretive to Brocade's non-GAAP earnings by Q1 FY17," Ruckus wrote on its website. "It will add a high-growth product category to Brocade's networking portfolio and is expected to expand Brocade's total addressable market (TAM) by $5 billion on day 1, with additional TAM expansion as the OpenG in-building wireless opportunity evolves in the next couple of years."
Ruckus investors cheered the news, sending the company's stock up almost 30 percent this morning. Brocade's shares fell slightly.
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