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Ruckus Wireless (NYSE:RKUS) is a carrier-class Wi-Fi solutions services provider. Founded in 2004, the company offers its services and products to Wi-Fi service providers, both large and small. With the company's unique suite of products, it has been able to play a huge role in the industry it operates in. The products from Ruckus ensure that service providers and corporations have access to reliable support systems with numerous benefits that include larger scalability, enhanced performance and extended range of coverage.

This is especially important as service providers continue to record rapidly increasing user volume and traffic. The company has a lot of products, both hardware and software, that are designed to enable its customers efficiently serve their constituents with little or no network resources on locations where they are not needed. Some of its products include BeamFlex, SmartCell, Smart Radio, Smart Mesh, Smart Qos, FlexMaster and Smart Scaling.

With the company's services and products, a lot of other companies and businesses have been able to successfully and easily initiate online integration as far as security and access are concerned. With its management service platform, its customers are able to efficiently monitor and control networks on a large scale. Based on this, these service providers are able to achieve unequaled evaluation of the distribution and use of their network resources.

Potential growth

Ruckus is sure to maintain a healthy top line growth with the increased popularity and success of its products and services in the Wi-Fi marketplace. Also, with the sustained shift from the use of PCs to smartphones and tablets, the need for Wi-Fi capacity and coverage solutions will steadily increase. This is especially as consumers are taking up network space at a highly accelerated speed.

Although the revenue growth will not be intense initially, it will increase significantly as more and more service providers and corporations are convinced of the reliability of the company's products.

Headwinds

The company's major headwind is the ability of the company's management to successfully maintain a solid negotiating leverage with a good number of its existing and potential larger end-customers. This is one sure way of retaining and subsequently growing the minimal market share it already maintains as a loss of one or more of its larger orders will adversely affect the company's top and bottom line growth.

The next headwind is that Ruckus is operating in a highly competitive market. It is competing against companies that are not just popular, but also have huge financial backing to invest in multiple growth opportunities as they arise without flinching.

Competition

The industry Ruckus operates in is one that is highly competitive. With giants like Cisco Systems (NASDAQ:CSCO), Ericsson Inc. (NASDAQ:ERIC), Aruba Networks (NASDAQ:ARUN), Hewlett Packard (HP) and Novatel Wireless (NASDAQ:NVTL), I would say Ruckus needs to do a lot more in order to maintain and grow its market share.

Even though its (Ruckus) products are unique in their own way, there are other products from other companies that are competing directly with what Ruckus presently offers. This can be offset with strategic product offerings that offer something new to consumers and at the same time help the company maintain solid pricing power among its peers.

Although Aruba seems to be slowly but steadily moving up to Cisco the latter will always remain an industry leader in terms of enterprise Wi-Fi sales. With the acquisition of Meraki, an enterprise Wi-Fi equipment/security appliance vendor, Cisco is strongly competing against Aruba in enterprise Wi-Fi as the solution from Meraki allows for lower admin costs and reduced time of installation. Meraki is presently experiencing a huge order growth on over $250 million per year order run rate.

On the other hand, Aruba's most recent contract is the award of supplying Wi-Fi access points in approximately 7,000 Starbucks stores in the U.S. The access points will enable Google to provide high-speed web access to the designated Starbucks stores' users. This is good news to Aruba's investors after the bad run experienced by the company's stock in early 2013.

Where the company stands in terms of market share

According to statistics from IDC, the enterprise Wi-Fi market saw an increase of 14.8% YoY in second quarter of fiscal 2013, which is mainly impacted by the increasing demand for enterprise mobility.

Ruckus was a part of this growth as it recorded a solid revenue growth of 37.3% when compared to the same quarter of the previous fiscal year. With its 5.5% overall market share, the company is invariably inching up to HP for the number three position in the Wi-Fi market.

Cisco leads the pack with its 53.7% overall market share recorded in second quarter of 2013. Its enterprise Wi-Fi revenue grew by 16.7% in comparison to the same quarter of the previous year and it reported a record enterprise revenue of $581 million for the quarter.

Following closely behind Cisco is Aruba which grew its enterprise revenue by 13.6% YoY in the reported quarter. It currently maintains 11% market share in the enterprise Wi-Fi market.

HP reported a 17.7% YoY increase in enterprise Wi-Fi revenue for second quarter of 2013. This raised its market share from the previous 5.4% to the present 6% it maintains.

Ruckus as a profitable company

The fact that the company reported an increase in revenues for the currently reported quarter but missed out on profits does not mean it is not profitable. According to the Vice President of Network Infrastructure, Rohit Mehra,

"Across all verticals and geographies, enterprise IT continues to see an explosion of mobility applications running on more devices than ever, resulting in new investments in WLAN infrastructure. While growth slowed slightly this quarter compared to previous quarters, the growing mobility needs of education, retail, healthcare and other distributed enterprise segments will continue to fuel substantial growth in the overall enterprise WLAN market."

Ruckus understands these needs and not being a company to miss out on future growth it has steadily invested in research and development and according to management, the company's operating profit in the coming quarters will take hits as a result of these investments.

The company is also diverting funds into sales and marketing in order to enable it to capture a significant size of the market opportunities in the future.

With these strategic investments, management looks forward to that time in the future when the company will consistently maintain attractive top line and bottom line growth. Profitability is out of the question now but in the long term investors are in for reasonable returns.

Conclusion

According to Petr Jirovsky, Senior Research Analyst with Worldwide Networking Trackers, the

"regional and country-level WLAN growth trends varied widely in 2Q13, the worldwide outlook for the enterprise, service provider, and consumer segments remains optimistic due to highly anticipated network upgrade cycles."

Infonetics collaborated this projection when it forecasted that

"the service provider Wi-Fi market will grow from approximately $300 million in 2011 to $2.8 billion by 2016, at a 57% CAGR."

With Ruckus being among the top vendors in the industry, the company is sure to benefit significantly from this growth especially as it continues to successfully add more end customers to its list.

With consumers constantly on the look out for Wi-Fi capabilities that will help them achieve easier online integration and the increasing carrier Wi-Fi deployments, Ruckus and its investors have a lot to gain in the mid to long term. With its Hotspot 2.0 technology, which is designed to completely eliminate the hassles and risks associated with connecting to public Wi-Fi, there is more room for growth in the long term.

Source: Ruckus Wireless: Set To Gain From Potential Growth In The Enterprise Wi-Fi Market