Source: The Wall Street Journal

Brocade Communications Systems Inc. agreed to buy Ruckus Wireless for about $1.2 billion, the latest in a series of moves by network-equipment companies to expand their Wi-Fi offerings.

The deal, which values Ruckus at $14.43 a share, caused that company’s stock to jump 32% to $13.20 a share. Brocade’s stock fell 14% to $9.15.

Brocade, based in Sunnyvale, Calif., was originally known for networking hardware used in data storage applications. But the company has branched into other networking segments, including routers and switches sold in competition with the likes of Cisco Systems Inc.
Ruckus, also based in Sunnyvale, specializes in Wi-Fi gear used by companies and public venues. Its chief executive, Selina Lo, is one of a small number of female CEOs of publicly held tech companies.

The growing popularity of Wi-Fi has triggered other deals in the sector. Cisco, for example, in 2012 agreed to buy Meraki Inc. for $1.2 billion. Hewlett-Packard Co. in March 2015 announced a deal to buy Aruba Networks Inc. for about $3 billion; that business is now part of Hewlett Packard Enterprise Co. since the H-P breakup.

Lloyd Carney, Brocade’s chief executive, said those two deals—and the prospect of competing against companies with expanded product lines—helped prompt the decision to buy Ruckus. He said the acquisition will help Brocade compete with the two larger companies without worrying partners that sell computing and storage products in competition with them, like International Business Machines Corp. and Dell Inc.

“Our larger partners like the fact that they know we’re never going to be in their business,” he said. “They know where our swim lanes are.”

Ruckus went public in 2012 at a price of $15 a share. After an initial run-up, the stock has traded considerably below that.

Dan Rabinovitsj, its chief operating officer, said his company wasn’t looking to be acquired. But he said the company’s board responded favorably to the price Brocade offered.

In the combined company, Ms. Lo will lead the Ruckus organization and report directly to Mr. Carney.

The companies expect the transaction to close in Brocade’s third fiscal quarter of 2016.

Brocade will pay about $1.5 billion in total, before deducting cash and investments held by Ruckus. That company’s stockholders will receive $6.45 in cash and 0.75 shares of Brocade for each share. The transaction price may fluctuate until close, the companies said.

Ruckus on Monday raised the lower end of its profit and revenue forecasts for the first quarter. The company said it now expects adjusted profit of 9 cents to 10 cents a share on revenue in the range of $98 million to $101 million.

In February, the company had issued guidance for first-quarter profit of 8 cents to 10 cents a share on revenue of $96 million to $101 million, according to FactSet.

The company also now expects adjusted-operating margin in the range of 9% to 11%, compared with prior guidance of 8.5% to 11%.

Brocade said it had increased its stock-repurchase program by $800 million, bringing the total remaining amount authorized under the program to about $1.7 billion. That move was meant to facilitate the repurchase of all shares issued in conjunction with the Ruckus acquisition.