After The Aruba Buyout, Ruckus Is The Next Best Bet
Tue, May 31, 3:52 PM
- With its acquisition of Ruckus Wireless behind it as of Friday, Brocade Communications (NASDAQ:BRCD) is up 5% and Goldman Sachs has raised its price target.
- The firm raised to $10, from $9, implying another 11% upside from today's price, though Goldman maintained a Neutral rating.
- It sees EPS dilution in the short term as Brocade makes incremental opex investments to sell the new portfolio (fiscal 2016 EPS lowered to $0.92 from $0.98). But it sees accretion for 2017 above the company's target of $0.08-$0.12: Goldman expects $0.14 accretion and raised its 2017 EPS target to $1.13 from $0.99.
- It also boosted EPS estimates for fiscal 2018 to $1.23 from $1.02.
- After the deal closing, BMO Capital Markets also raised its price target on Brocade, to $9 from $8. That firm maintains a Hold rating on the stock as well.
Fri, May 27, 10:20 AM
- Brocade (NASDAQ:BRCD) is up 2.2% after announcing it closed its acquisition of Ruckus Wireless (NYSE:RKUS), a roughly $1.2B deal.
- "The combined company will be able to deliver superior focus and speed of innovation and best-in-class solutions spanning the full spectrum of networking," says Brocade CEO Lloyd Carney.
- Brocade's offer (for Ruckus common stock at $6.45/share in cash and 0.75 shares of Brocade) expired at midnight with about 58.3% of Ruckus' outstanding shares tendered.
- Brocade had entered a credit agreement for a term loan facility of $800M and a revolver of $100M, which can finance the exchange offer as well as a possible buyback to come.
Thu, May 19, 6:32 PM
- After briefly erasing its post-earnings losses, Brocade (NASDAQ:BRCD) is now down 3.9% after hours to $7.66. Apparently weighing: Not counting the Ruckus Wireless (NYSE:RKUS) acquisition (due to close at month's end), Brocade is guiding for FQ3 revenue of $510M-$530M and EPS of $0.19-$0.21, below a consensus of $547M and $0.24.
- Ruckus is expected to add another $50M-$60M to FQ3 revenue, after factoring a $15M-$20M deferred revenue write-off, and to lower combined EPS to $0.14-$0.17. The Wi-Fi equipment maker is expected to have a neutral impact on FQ4 EPS, and a $0.02-$0.03 accretive impact for each quarter in FY17 (ends Oct. '17).
- Brocade's SAN product revenue (driven by Fibre Channel switches/directors) is expected to be down by 3.5%-7% Q/Q in FQ3 due to continued storage industry weakness - OEM partners such as EMC, NetApp, and IBM have reported weak storage sales. IP networking (Ethernet switch/IP router) product revenue is expected to be up 7%-14% Q/Q thanks to stronger Americas and federal demand. Global Services revenue is expected to be down 1%-2% Q/Q.
- Though officially missing consensus by $7.5M, FQ2 revenue of $523M (-4% Y/Y) was in-line with the guidance ($518M-$528M) Brocade provided in its May 2 warning. Brocade mostly blamed SAN weakness for the warning, while also noting it's seeing IP networking headwinds.
- Brocade's FQ2 results, details/dividend hike, earnings slides (.pdf)
Tue, May 3, 12:16 PM
- Wunderlich has dropped Brocade (BRCD -4.2%) to Hold from Buy, following on the company's own downbeat guidance driven by weakness in storage area networking.
- The firm's analyst Matthew Robison trimmed his price target to $9, from $10.50, implying 10%-plus upside from today's lower price.
- The warning looks like economic slowdown and an organic recovery may be a few quarters off, Robison says.
- Some product cycles may be a bit further from contributing, he says, noting it could be late summer before Gen6 Fibre Channel got fully qualified by OEMs. “With OEM channel inventory down, we were encouraged to view the upcoming Gen6 Fibre Channel upgrade cycle as something to invest in rather than wait for. We have changed our mind," he writes.
- Ruckus Wireless (NYSE:RKUS), set to be acquired by Brocade, is down another 1.9% today following on yesterday's 7.3% decline. (Brocade closed yesterday down 11.5%.)
- Now read Cisco Rivals Brocade And Ruckus Are Merging. Who's Next? »
Mon, May 2, 4:54 PM
Mon, May 2, 11:27 AM
- Ruckus Wireless (RKUS -7.4%) is off sharply after Brocade (BRCD -12.3%), which a month ago agreed to buy Ruckus in a cash/stock deal, cut its FQ2 (April quarter) revenue guidance to $518M-$528M from $542M-$562M, and slightly lowered its EPS guidance to $0.21-$0.23.
- Brocade mostly blames its warning on weaker-than-expected SAN (storage networking) revenue, while also mentioning it's seeing service provider and U.S. federal headwinds in its IP networking (Ethernet switch/IP router) business. Brocade OEM clients such as EMC, IBM, HP Enterprise, and NetApp have been reporting weak storage sales, as cloud storage platforms running on commodity hardware continue gaining ground. SAN sales have also been hurt by growing adoption (including by cloud providers) of standalone storage and integrated server/storage systems interfacing with Ethernet and InfiniBand (rather than Fibre Channel SAN) links.
- With Brocade having agreed to pay $6.45/share in cash + 0.75 shares for each Ruckus share, the deal is now worth $12.79/share to Ruckus shareholders, down from the $14.43/share it was worth when first announced. Brocade reports on the afternoon of May 19. Ruckus slightly upped its Q1 guidance at the time the Brocade deal was announced.
Mon, Apr. 4, 12:50 PM
Mon, Apr. 4, 9:13 AM
Wed, Mar. 9, 7:20 PM
- IDC estimates the enterprise Wi-Fi market grew 5.9% Y/Y in Q4, and 3.7% over the whole of 2015. The firm blames recent slow growth on macro uncertainty and delayed spending ahead of the full availability of (mobile-friendly) Wave 2 802.11ac Wi-Fi systems. The consumer market, where firms like Netgear (NASDAQ:NTGR) and D-Link compete, declined 3.9% in Q4 and 4.8% in 2015.
- Cisco (NASDAQ:CSCO) is still the enterprise market's dominant vendor, even if its share has been slipping a bit. IDC respectively assigns Cisco Q4 and full-year enterprise Wi-Fi shares of 45% and 47%, down from 48.1% and 47.8% a year earlier. Cisco's wireless revenue (dominated by Wi-Fi) was flat Y/Y in the company's January quarter at $613M.
- #2 HP Enterprise (NYSE:HPE), which acquired Wi-Fi hardware/software vendor Aruba Networks last year for $3B, is estimated to have a 16.9% 2015 share (up 70 bps Y/Y) after factoring sales from both Aruba and HP proper. Thanks in part to Aruba, HPE reported 54% Y/Y networking sales growth for its January quarter, allowing the company's enterprise hardware unit to see positive growth in spite of server, storage, and tech services declines.
- #3 Ruckus Wireless (NYSE:RKUS) is estimated to have a 6.9% share, up from 2014's 6.3%. Aerohive (NYSE:HIVE), which has benefited from the FCC's E-Rate program for school broadband connectivity, is assigned a 2.1% share.
Wed, Feb. 10, 11:44 AM
- Down sharply after hours yesterday after posting a Q4 sales miss and issuing in-line Q1 guidance, Ruckus Wireless (NYSE:RKUS) has reversed course today. With shares having gone into earnings just $0.23 above a 52-week low of $7.25, markets appear to be concluding any bad news was priced in.
- Citing a Wi-Fi spending pause among cable providers, SunTrust's Inder Singh has downgraded Ruckus to Neutral today, and cut his target by $5.50 to $8.50. He sees Ruckus' growth peaking in Q1.
- On the other hand, Needham's Richard Valera is reiterating a Buy, while cutting his target by $3 to $11. Valera: "4Q15 marks the 4th out the last 6 Qs RKUS will have missed the consensus top line. While clearly disappointing, we believe the precipitous recent slide in the shares already largely baked in less-than-perfect results ... with a solid position in [FCC E-Rate programs], a strong position in Wave 2 [802.11ac Wi-Fi] and likely continued strength in service provider, we see RKUS as positioned to deliver mid-teens revenue growth and better earning growth in '16."
- Ruckus' Q4 results, guidance/details
Tue, Feb. 9, 5:10 PM
- Ruckus Wireless (NYSE:RKUS) has dropped to $6.72 after hours after posting a Q4 sales miss and in-line EPS. Q1 guidance is in-line: Revenue of $96M-$101M (up from $82.1M a year ago) and EPS of $0.08-$0.10 vs.a consensus of $99.3M and $0.09.
- The Q4 shortfall is blamed on "a multi-million dollar E-rate opportunity that was postponed late in the quarter." 11 service provider and ~4,300 enterprise end-customers were respectively added vs. 14 and ~4,000 a year ago. The service provider and enterprise bases now respectively stand at over 260 and over 65,000.
- Op. margin rose 20 bps Y/Y to 14%. Ruckus ended Q4 with $230M in cash and no debt.
- Ruckus' Q4 results, earnings release
Tue, Feb. 9, 4:20 PM
- Ruckus Wireless (NYSE:RKUS): Q4 EPS of $0.13 in-line.
- Revenue of $100.11M (+16.6% Y/Y) misses by $1.76M.
Mon, Feb. 8, 5:35 PM
Wed, Feb. 3, 1:32 PM
- Though the Nasdaq is down 1.5%, many telecom equipment and optical component firms are rallying after network test equipment/telecom software provider Viavi (VIAV +17.6%) and optical component vendor Oclaro (OCLR +11.4%) beat calendar Q4 estimates and issued strong Q1 guidance.
- The list includes optical networking hardware firms Ciena (CIEN +3.9%) and Infinera (INFN +4.9%), component vendors Finisar (FNSR +5.3%) and Alliance Fiber (AFOP +2.2%), Wi-Fi hardware provider Ruckus (RKUS +3.5%), and VoIP and 4G signaling hardware/software firm Sonus (SONS +2.5%).
- Component maker NeoPhotonics (NPTN +14.7%) is posting double-digit gains, aided by an upgrade to Strong Buy from Raymond James. RJ says its checks point to strong sales fueled by Chinese demand and 100G metro optical buildouts.
- Oclaro guided for calendar Q1 (FQ3) revenue of $97M-$100M, soundly above a $90M consensus. The FQ2 beat was fueled by a 21% Y/Y increase in 100G product sales (53% of total revenue), which offset a 7% drop in sales of 10G and lower-speed products (35% of revenue). (earnings release)
- Viavi's beat was aided by a 5.7% Y/Y sales increase for the company's core network enablement (test instrument) business. The unit delivered Y/Y sales growth for the first time in five quarters. (earnings release)
- Viavi and Oclaro's numbers came shortly after optical component contract manufacturer Fabrinet soared in response to an FQ2 beat and strong FQ3 guidance. Fabrinet's revenue from 100G programs nearly tripled Y/Y in FQ2.
Tue, Feb. 2, 2:05 PM
- OTR Global has downgraded Ruckus Wireless (RKUS -6.3%) to Mixed from Positive ahead of the carrier/enterprise Wi-Fi hardware firm's Feb. 9 Q4 report. Ruckus is seeing steep losses on a day the Nasdaq is down 2.1%.
- Separately, Ruckus has unveiled a new entry-level enterprise Wi-Fi access point (the ZoneFlex R310); both regular and controller-free models are offered. The company has also updated its T300 access point line to include controller-free models, and added support for its SmartMesh tech (eliminates the need to run Ethernet cables to all access points) to its controller-free hardware.
Wed, Jan. 20, 1:18 PM
- Like clockwork, high-beta tech stocks continue selling off at a feverish pace as markets nosedive. Today's selloff comes with the Nasdaq down 2.7%, and the S&P 3%. Margin calls are likely a contributing factor.
- Solar stocks, which sold off yesterday even as major indices moved little, are underperforming again as energy stocks get routed once more and oil drops below $27/barrel. Hard-luck SunEdison (SUNE -13.6%) is now close to $2. Also tumbling: Canadian Solar (CSIQ -8.8%), ReneSola (SOL -8.2%), and Yingli (YGE -6.9%).
- Security tech plays FireEye (FEYE -9.3%), Palo Alto Networks (PANW -6.1%), Rapid7 (RPD -11.6%), and Vasco (VDSI -10.5%) aren't faring better - peers Fortinet and Barrcauda were downgraded this morning. Nor are Splunk (SPLK -7.7%) and Tableau (DATA -7.2%), two firms often hyped as big data/analytics plays, or Russian tech firms Yandex (YNDX -6.6%) and Qiwi (QIWI -6.9%), which often sell off when oil prices and the ruble are under pressure.
- Elsewhere in tech, big decliners include Zillow (Z -7.1%), Square (SQ -6.7%), Fitbit (FIT -6.6%), Groupon (GRPN -6.9%), TrueCar (TRUE -7.7%), Pure Storage (PSTG -7.8%), Jive Software (JIVE -7.4%), Shopify (SHOP -7.2%), Ruckus Wireless (RKUS -8%), Renren (RENN -6.8%), Infinera (INFN -6.1%), TripAdvisor (TRIP -6.5%), Ellie Mae (ELLI -6.7%), and Knowles (KN -6.2%).
- Also off sharply: Several large-cap tech stocks, TowerJazz, Synaptics, Adtran