Ruckus Wireless is back in play thanks to another wireless technology merger. Broadcom Limited is looking to acquire Brocade Communications for $5.9 billion, with plans to divest Ruckus, which Brocade purchased for $1.2 billion this spring.
Broadcom, a California company that designs chips for wireless devices and networks, was itself a takeover target last year. The company was purchased by Singapore’s Avago for roughly $37 billion, and Avago named the combined company Broadcom Limited.
Brocade, which makes software for digital networks, expanded its addressable market by buying Ruckus earlier this year. Ruckus makes Wi-Fi access points and switches, and with Brocade said they would be the world’s leading provider of service provider Wi-Fi solutions and storage area networking solutions.
Now Brocade will focus on storage solutions as it becomes part of Broadcom Limited. For Broadcom, the Ruckus hardware business is less attractive as it competes with some of the same hardware makers that buy Broadcom’s chips. Broadcom said with Brocade’s help it will divest Brocade’s IP networking business, including its wireless and campus networking business, its data center switching and routing business and its software networking solutions.
Broadcom’s purchase of Brocade is not dependent on the sale of Ruckus. The deal is expected to close within the next six months, subject to regulatory approvals, customary closing conditions and the approval of Brocade’s stockholders. Broadcom’s offer includes $5.5 billion in cash and assumption of Brocade debt of roughly $400 million.
“This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers,” said Broadcom CEO Hock Tan. “With deep expertise in mission-critical storage networking, Brocade increases our ability to address the evolving needs of our OEM customers.”
Broadcom’s move on Brocade is the latest in a series of deals involving semiconductor companies: Japan’s SoftBank is in the process of purchasing ARM; Intel has purchased Altera; and NXP bought Freescale and then agreed to be acquired by Qualcomm for $39 billion.
Meanwhile Ruckus could find a new home with one of the companies that makes network equipment for wireless carriers. Although Wi-Fi is the company’s primary business, it also has a solution for cellular networks operating in the 3.5 GHz spectrum band.
“The interest in the 3.5 GHz LTE product, let alone Ruckus’ strong carrier class WiFi product, will make it an attractive target for multiple potential buyers,” said analyst Walter Piecyk of BTIG. When Ruckus changed hands seven months ago, Nokia, Ericsson, CommScope and Juniper were all mentioned as possible interlopers who might try to take Ruckus away from Brocade. Now these companies have a second chance.
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