After numerous delays, Broadcom has finally completed its yearlong $5.5 billion quest to buy Brocade Systems, clearing the way for Arris to purchase Brocade’s Ruckus Wireless assets.
Arris’ $800 million Ruckus purchase, announced in February, was contingent on the closure of Brocade’s acquisition of Broadcom, which was announced in November 2016 and expected to close at the end of July.
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In an 8-K filing to the SEC, Brocade said that it had jointly agreed with Broadcom to refile their regulatory application with the Committee on Foreign Investment in order to build more time into the process. Once the agency accepts the new, jointly filed notice, it will take 30 days to review it. This will be followed by a 45-day investigation period.
In October, reports emerged that Broadcom had to push up the deadline to close the deal to comply with further regulatory reviews. Both sides had the option to abandon the deal on November 1.
Ruckus technology is integral to Arris’ plans to enter the wireless business. In July, for example, Arris announced that Ruckus components are included in the Carrier-Class Service Provider Wi-Fi Solution. Currently deployed by Mediacom, it's the backbone of the MSO’s new Wi-Fi network.
Analysts, who have been lamenting the decline of Arris’ pay TV set-top business, are bullish regarding the company’s Brocade purchase.
“We believe Ruckus can be a transformational acquisition that will help return Arris to organic growth despite the obvious challenges for set-top boxes,” said BTIG Research analyst Walter Piecyk.
“We are increasingly optimistic about the new revenue opportunities available to Ruckus based on the broadening interest in 3.5 GHz spectrum as an early 5G building block for cable, wireless and even technology companies,” Piecyk added. “In addition, we believe Ruckus’ legacy enterprise WiFi business has stabilized after the weakness created by the disruption from Brocade. Finally, Arris strong free cash flow will enable it to retire at least 20% of its share count over the next two years, if the stock does not adequately respond to its return to growth in 2018.”