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.
Ruckus (RKUS +3.2%) is buying Cloudpath Networks, a provider of software for securely verifying, connecting, and logging in Wi-Fi users (i.e. onboarding). Terms are undisclosed.
Ruckus: "[Cloudpath's] one-time enrollment process verifies the user and the device and automatically configures the device with the appropriate wireless network and certificate for the desired policy. Returning users connect automatically to the secure network with the appropriate policies ... Cloudpath's flagship Enrollment System enables networks to simply and securely adopt certificate-based Wi-Fi, eliminating the IT support costs and user frustration associated with passwords."
Cloudpath's products will be integrated with Ruckus' hardware/software for the enterprise, education, retail, and hospitality Wi-Fi markets. Ruckus notes Cloudpath is particularly strong in education.
Nokia (NYSE:NOK) and Alcatel-Lucent's (NYSE:ALU) planned merger could unravel Nokia's R&D partnership/reseller deal with Juniper (NYSE:JNPR). Juniper, which has partnered with Nokia on solutions that pair the former's routers with the latter's base stations and mobile core network gear, counts Alcatel as its second-biggest rival (after Cisco) in the carrier router market, and also squares off against the company in other markets such as carrier SDN software.
Ruckus (NYSE:RKUS) is another Nokia partner that could be in the crosshairs: The company competes against Alcatel in carrier Wi-Fi hardware, and has a reseller deal with Nokia that goes back to 2012. The deal was recently expanded to cover Wi-Fi/4G small cell systems.
At the same time, the merger has fueled speculation one or more rivals could respond with acquisitions of their own. A potential acquisition of Juniper by mobile infrastructure giant Ericsson (NASDAQ:ERIC) has especially been the subject of much talk.
Ericsson is also viewed as a potential suitor for optical networking hardware vendors/fellow Alcatel rivals Ciena and Infinera. Ruckus has been seen as a potential M&A target for a long time. However, it currently competes against Ericsson, which bought Wi-Fi hardware vendor BelAir Networks in 2012.
RF backhaul hardware maker DragonWave (NASDAQ:DRWI) could also lose business thanks to the merger; it bought Nokia's RF backhaul business in 2012. and maintains a reseller deal. However, H.C. Wainwright recently downplayed those concerns, arguing Alcatel's RF backhaul systems are expensive and clunky.
Juniper and Ericsson report earnings on April 23, and Ruckus on April 30.
Bloomberg reports HP (HPQ -10.1%) is in talks to acquire enterprise Wi-Fi hardware/software provider Aruba Networks (ARUN +22.5%), and that a deal could be announced as soon as next week. Aruba has skyrocketed on the report, and has taken rival Ruckus (RKUS +4.7%) higher with it. Aruba's market cap is now around $2.5B.
Aruba is the enterprise Wi-Fi market's #2 player - behind Cisco (NASDAQ:CSCO), which towers over the space - and HP is also in the top-5. IDC estimates Cisco, Aruba, Ruckus, and HP respectively had Q2 2014 enterprise Wi-Fi shares of 46.8%, 11.8%, 6.2%, and 4.5%.
HP, whose shares have plunged today due to an FQ1 revenue miss and soft guidance, saw its total networking revenue drop 11% Y/Y in FQ1 - "execution issues" in the U.S. and China were blamed. The IT giant has suggested it's open to making enterprise acquisitions ahead of its PC/printing spinoff.
Reuters reports Motorola Solutions (MSI +0.1%) is thinking of selling its slumping enterprise Wi-Fi unit. One source cautions talks are in their early stages.
Motorola's Wi-Fi division sales fell by a mid-single digit % Y/Y in Q2, and by 30% in Q1. By contrast, IDC estimates global enterprise Wi-Fi sales rose 14.8% during the quarter.
Potential buyers include rivals Aruba (ARUN +1%), Ruckus (RKUS +0.1%), and Ubiquiti (UBNT +3%). Market leader Cisco could also make a bid, but with the company already having an estimated 58.4% Q2 share (per IDC), regulators might not be thrilled. Also, Cisco is in the midst of integrating Wi-Fi hardware/software vendor Meraki, which it bought for $1.2B.
Motorola's total enterprise sales fell 12% Y/Y in Q2, if one excludes the impact of the Psion acquisition; the Wi-Fi unit accounted for 8% of 2012 enterprise sales, or $216.7M. Q3 results arrive on Wednesday.