Nomad_Soul - Fotolia

News Stay informed about the latest enterprise technology news and product updates.

Brocade acquisition to attract several buyers for unwanted Ruckus WLAN

Broadcom's decision to sell the Ruckus WLAN product following the Brocade acquisition is expected to lead to offers from Dell, Juniper and Nokia.

Broadcom Ltd.'s plan to sell Brocade Communications Systems Inc.'s IP networking business has sparked speculation on potential buyers for Ruckus Wireless Inc., the wireless LAN vendor Brocade has owned for only six months.

Chipmaker Broadcom announced the $5.9 billion Brocade acquisition last week, saying it would only keep the company's Fibre Channel and storage area networking portfolio. Broadcom said it would sell the rest of Brocade to avoid competing with customers who buy its silicon to power their IP switches. Those customers include Cisco and Juniper Networks.

Observers named Dell Technologies, Juniper Networks and Nokia as potential buyers for Ruckus, which will likely attract the attention of "any enterprise networking company that doesn't have a footprint in the wireless [LAN] space," said Mark Hung, an analyst at Gartner.

Driving interest in Broadcom's Brocade acquisition is the trend among wired access providers to add wireless LAN products to their portfolios. Examples include Hewlett-Packard's $2.7 billion purchase of Aruba Networks last year and Cisco's $1.2 billion acquisition of Meraki in 2012. Hewlett Packard Enterprise (HPE) owns Aruba today, as a result of HP splitting into two companies.

Brocade acquired Ruckus earlier this year to expand its portfolio of campus networking, data center switching and routing, and software-defined networking products. Analysts expect Broadcom to sell that portion of Brocade's business separately.

Broadcom likely to sell Brocade in pieces

The likelihood of a company buying Brocade's entire IP networking business is small. "I don't believe anyone will buy all that Broadcom doesn't want in Brocade," said John Fruehe, an analyst at Moor Insights & Strategy, based in Austin, Texas.

Broadcom is likely to get more money from the Brocade acquisition, if it sells the technology it doesn't want separately. While Ruckus is the most valuable portion, "one should not underestimate the longer-term and strategic value of Brocade's software business unit and its platform offerings that span the enterprise, communication service provider and cloud provider segments," said Rohit Mehra, an analyst at IDC.

A private equity firm looking to make a quick profit is the most likely buyer of Brocade's non-Ruckus assets, Fruehe said. But building a long-term, profitable business out of the portfolio will be tough, given that large tech companies, including Cisco and HPE, provide similar technology.

"If a private equity firm bought them, they would most likely clean them up, put on a fresh coat of paint and then try to resell them for a quick-flip profit," Fruehe said.

Brocade's Ethernet and IP networking business generated $600 million in revenue last year, according to market research firm Dell'Oro Group Inc., based in Redwood City, Calif. Annual revenue this year is expected to rise to almost $800 million because of the Ruckus acquisition.

Worldwide wireless LAN sales to the enterprise grew by 9.4% year over year in the second quarter, the highest increase in more than two years, according to IDC. The increase is due to companies upgrading their WLANs to take advantage of the faster speed of the latest Wi-Fi 802.11ac technology.

Next Steps

Finding the best cloud-managed WLAN products

Troubleshooting wireless connection problems

How to include security in WLAN testing

Dig Deeper on Wireless LAN (WLAN)