Acquisition valued at $1.5 billion
In May 2016, Brocade Communications Systems (BRCD) announced that it completed the acquisition of Ruckus Wireless (RKUS). This acquisition will help Brocade become a “pure-play networking company.” Under the terms of the acquisition agreement, the stockholders of Ruckus received $6.45 in cash and 0.75 shares of Brocade’s common stock for each share of Ruckus. The transaction was initially valued at $1.5 billion.
With the acquisition of Ruckus, Brocade can now pursue opportunities in emerging markets (EEM) such as India (INDA) and China (FXI) in segments including 5G mobile services, the IoT (Internet of Things), Smart Cities, and the convergence of LTE (long-term evolution) and Wi-Fi technologies.
The above chart shows the diverse and exponential growth potential in the IoT space. Semiconductor heavyweights such as Intel (INTC) and Micron Technology (MU) are also banking on the IoT segment to drive revenues in the future.
Acquisition will help Brocade penetrate the networking space
“The combined company will be able to deliver superior focus and speed of innovation and best-in-class solutions spanning the full spectrum of networking,” said Lloyd Carney, Brocade’s CEO. “Our combined world-class portfolio now provides customers with greater flexibility in meeting today’s infrastructure requirements, including high performance, flexible, secure access networks.”
Companies are now eyeing massive digitalization of businesses, and this will drive the demand for network architecture. Brocade had earlier stated that this partnership would open up a number of revenue streams from business segments including higher education and hospitality.
Taking the Ruckus Wireless acquisition into account, Brocade expects to see revenues of $560 million–$590 million and a non-GAAP operating margin of 17%–19% in fiscal 3Q16.
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