Ruckus shares soar on $1.5 billion acquisition by Brocade

In a move to expand its clout in the wireless service provider business, networking giant Brocade Monday announced the acquisition of Ruckus Wireless for $1.5 billion.

Net of cash, the deal is valued at about $1.2 billion. It’s a major move by Brocade, of San Jose, to deal with a fast-changing marketplace.

“We’re positioning ourselves to lead where technology is headed,” said Brocade CEO Lloyd Carney.

The news sent shares of Sunnyvale-based Ruckus, a wireless pioneer, soaring more than 30 percent to percent to $13.15 in midday trading, while Brocade’s dived more than 14 percent to $9.10.

The merger “is definitely a good thing” long-term for Brocade expanding its WiFi service segment, said analyst Mitch Steves of RBC Capital Markets.

Brocade should see the most benefit in selling wireless to the federal government, said analyst Matt Robinson of Wunderlich Securities.

The merger should help position the San Jose networking company for the eventual adoption of 5G, he said, but it will be up against major strategic vendors like Nokia, Alcatel, Ericsson and Cisco Systems, he said.

The Ruckus group will be led by Selina Lo, the Sunnyvale wireless company’s current CEO. She will report directly to Brocade CEO Lloyd Carney.

Lo noted in a statement that the two companies operate in adjacent parts of the networking and wireless marketplace, often selling to the same customers. Ruckus and Brocade “have a successful track record of working together,” Lo said.

Shareholders will receive $6.45 in cash and 0.75 shares of Brocade common stock for each share of Ruckus common stock. The transaction values Ruckus at $14.43 a share based on Brocade’s price on April 1.

Brocade said in a statement that the combination of the two companies “creates a new type of pure-play networking company, with solutions spanning from the heart of the data center to the wireless network edge.”

In addition, Brocade said, the move strengthens Brocades competitiveness around 5G mobile services, the internet of things, Smart Cities and other forward-looking technologies.

Photo: Brocade Communications Systems’ campus off North First Street in San Jose is shown in 2010. (Karen T. Borchers/Mercury News)

 

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