Brocade Communications Systems, Inc.NASDAQ
Brocade Can Benefit From Some Financial Engineering
Darspal S Mann
Darspal S Mann
Brocade On Better Footing, But It Won't Be Getting Easier
Stephen Simpson, CFA
Stephen Simpson, CFA
Mon, Nov. 21, 5:07 PM
Sun, Nov. 20, 5:35 PM
Tue, Nov. 8, 1:42 PM
- Broadcom (AVGO +0.4%) has a $6.5B bridge loan lined up from six banks for its acquisition of Brocade (BRCD -0.1%), Reuters reports.
- The companies came to agreement on an all-cash $5.9B buyout of Brocade (including debt) last Wednesday.
- Signing on to the unsecured loan, according to Reuters: BofA Merrill Lynch, Deutsche Bank, Barclays, Bank of Montreal, Citigroup and Credit Suisse. They'll hold the loan until permanent financing is in place by next April, when closing is expected.
Wed, Nov. 2, 3:02 PM
Wed, Nov. 2, 7:16 AM
- As has been floated for the past few days, Broadcom (NASDAQ:AVGO) is buying Brocade (NASDAQ:BRCD), with the all-cash price working out to $12.75 per share.
- Broadcom expects to fund the deal with new debt and cash already on the balance sheet. The purchase is expected to be immediately accretive to non-GAAP free cash flow and EPS. The company sees Brocade's FC SAN business as contributing about $900M of pro forma non-GAAP EBITDA is FY18.
- A conference call is set for 8 ET.
- BRCD +8.1% to $12.15 premarket.
Tue, Nov. 1, 3:25 PM
- If Broadcom (AVGO -1.4%) goes through with an acquisition of Brocade Communications (BRCD +7.3%), it would combine its $67B business with one now worth $5.6B after two days of sharp gains.
- In a deal (which is not final and could fall apart), Broadcom would keep Brocade's Fibre Channel and storage business (about $1.5B in annual revenues) but look to divest the networking business -- much of which was acquired in Brocade's own acquisition of Ruckus Wireless.
- Broadcom would bulk up its offering tied to data center backbones with the addition of a high-margin fiber business like Brocade's.
- Brocade is now up 31% over the past two days, moving it into positive ground for 2016 (up 23.9%).
Tue, Nov. 1, 3:15 PM
- Brocade Communications (NASDAQ:BRCD) has made another sharp move up, now +7.1%, on a report that it's near a deal to be acquired by Broadcom (AVGO -1.5%).
- The news comes a day after its deal-chatter-fueled 22% rise.
- The deal could be announced later this week, Reuters reports.
- RBC Capital has upgraded shares to Outperform and raised its price target to $14, making room for 29% more upside from the new level set. As with others, RBC is pointing to Broadcom (NASDAQ:AVGO) chief Hock Tan as a very interested party.
- “We think that Brocade makes sense as a strategic asset to the right operator or CEO (Hock Tan as a solid operator), which would lead to mid-single-digit accretion for the acquirer (35%+ operating margin potential),” writes Mitch Steves.
- If Broadcom can achieve $200M in opex synergies in a deal, it's $0.65 accretive to the acquirer, Steves says. And he also points to other potential buyers, including IBM, Oracle and Hitachi (OTCPK:HTHIY).
Mon, Oct. 31, 3:57 PM
- Brocade Communications (NASDAQ:BRCD) is up 22.3% and hanging right at 52-week high range after news that it's in talks to sell itself and getting close to the end of that process.
- A deal could be announced this week, Bloomberg reports, and one of the interested parties is reportedly Broadcom (AVGO +0.7%), which could be interested in supplementing its switch-chip business with Brocade's networking gear. Broadcom CEO Hock Tan has said he's interested in acquisitions.
- Such a deal might allow for better competition against much bigger rival Cisco Systems (CSCO +0.4%). "A purchase by Broadcom (Avago) would be a strategic move by Broadcom to vertically integrate in an IP switching and routing market that has increasingly moved to merchant silicon," notes Stifel analyst Aaron Rakers.
- He's maintained a Hold rating and $10 price target (the boost today has put Brocade at $10.63). He doesn't know any inside information about activity around Brocade this week but notes that for years, talk has persisted that Brocade might sell itself to suitors like H-P (NYSE:HPQ), Oracle (NASDAQ:ORCL) or IBM (NYSE:IBM).
- With current net debt (about $440M) and at $11/share, Brocade would come at about a $4.9B enterprise value, 7.3 times EBITDA, he says.
Mon, Oct. 31, 12:56 PM
Mon, Oct. 31, 12:47 PM
- The company is nearing the final stages of a sale process, according to the report, with Broadcom among the potential buyers. BRCD +22%
Tue, Oct. 4, 7:15 PM
- Brocade Communications (BRCD +1.6%) got an initiation at Buy today by D.A Davidson, which sees strength in the Ethernet market as well as Fibre Channel, and a key addition in Ruckus Wireless.
- Analyst Mark Kelleher set a price target of $12, implying 27% upside from today's close. Shares are up 4.9% over the past month.
- Adding Ruckus in a $1.2B deal "strengthens the company's position at the 'edge' of the network, provides BRCD with end-to-end networking solutions, and offers the ability to cross-sell products into the other's customer base," Kelleher writes.
- Meanwhile, Brocade's next-gen Fibre Channel switches "will be particularly critical for flash-based storage arrays." The "Gen 6" switches double up throughput from Gen 5, to 32 Gbps.
Thu, Sep. 22, 5:25 PM
- Brocade Communications (BRCD +1.9%) has extended change-of-control retention agreements with its executive team for another three years.
- The deals in particular cover CEO Lloyd Carney; Chief Technology Officer Ken Cheng; Chief Operating Officer Gale England; Chief Financial Officer Daniel Fairfax; and Senior VP of Worldwide Sales Jeffrey Lindholm.
- Those original deals were set to expire next month, but were extended until Nov. 2, 2019, likely the last day of fiscal 2019 for Brocade.
Wed, Sep. 7, 8:24 AM
Wed, Aug. 31, 7:58 PM
- Brocade Communications Systems (BRCD -2.3%) has gotten a (lonesome) bullish call form Argus, which has reiterated its Buy rating amid an overwhelming Neutral sentiment.
- Shares have fallen 14% in the four days of trading since the company beat expectations with its fiscal Q3 earnings, but largely due to its acquisition of Ruckus Wireless while the Fibre Channel business disappointed compared to rivals.
- The sell-off makes an attractive entry point, says Argus' Jim Kelleher, for a company “which is now positioned to break out of slow-growth mode.” He has a price target of $13, implying 44.8% upside from today's closing price.
- “For the longer terms, Ruckus and other niche assets such as SteelApp increase Brocade’s ability to steer traffic toward its core data center products,” Kelleher said. "Despite current tepid IT spending, we believe the long-term strategic plan is in place.”
- Several analysts reiterated Neutral ratings last week, and RBC Capital joined them in reiterating a Hold over the weekend.
Fri, Aug. 26, 5:39 PM
- Brocade Communications (NASDAQ:BRCD) slid 11.7% today on some lukewarm commentary from analysts in spite of earnings that beat on top and bottom lines, with no small help from its acquisition of Ruckus Wireless.
- Several analysts reiterated Neutral ratings, but Robert Baird held firm to an Underperform and an $8 price target (implying downside of nearly 24%) amid some challenges ahead.
- "While Brocade remains optimistic new gen-6 Fibre channel products and better trends in the IP/Ethernet business may lead to improved results during F2017, we think evidence of a turnaround may not become apparent for at least a few more quarters," says Jayson Noland, "given the potential to see disruption from the Dell/EMC deal, headwinds from the transition to flash/hyper-converged storage, competitive IP/Ethernet pressures, and distractions as the company integrates the Ruckus Wireless business."
- Citigroup was among the firms keeping Neutral, but raised its price target to $11. Deutsche Bank did the same (Hold rating, price target boosted to $9 from $8).
- Piper Jaffray held its Neutral but raised its target to $9 as well. Results looked nice with the help of the Ruckus acquisition, Andrew Nowinski said, but excluding that: "The Ethernet segment was below expectations, primarily due to weaker than expected U.S. Fed demand. Fibre Channel storage results were in-line with expectations, which was somewhat surprising given the strong demand trends reported by NetApp, Pure Storage and Nimble ... We remain concerned with weak performance in the Storage and IP Ethernet segments."
Fri, Aug. 26, 3:00 PM