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November 1, 2016

Brocade said to be in acquisition talks, Broadcom rumoured as buyer

Broadcom is one of the interested potential buyers.

By CBR Staff Writer

Data-storage and networking provider Brocade Communications is reportedly in final stages of discussions to sell its business.

The company is finalising the sale deal, with chipmaker Broadcom being one of the interested buyers, people familiar with the matter told Bloomberg.

However, Brocade has not reached any deal with a party and talks could “still fall apart”, sources said.

If the talks are successful, the acquisition of Brocade could be announced as soon as this week, the publication reported.

While Brocade holds nearly $1.2bn in cash, its debt is $1.5bn.

Acquiring Brocade’s networking gear could be “attractive” for component makers such as Broadcom.

The transaction is expected to help an acquirer to increase its role in building data brocadecentres required to meet growing demand for cloud computing.

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Broadcom chief executive officer Hock Tan was quoted by the publication as saying that he is in the market to acquire more companies.

Tan has made several acquisitions to turn the chipmaker into a $67bn company.

Due to competition from Cisco Systems, California-based Brocade has faced many problems to increase its growth in networking.

In April, Brocade entered into an agreement to acquire Ruckus Wireless in a cash and stock transaction worth $1.2bn.

The acquisition was expected to strengthen Brocade’s ability to pursue emerging market opportunities around 5G mobile services, Internet of Things (IoT), Smart Cities, OpenGtm technology for in-building wireless, and LTE/Wi-Fi convergence.

Brocade chief executive officer Lloyd Carney earlier said: “This strategic combination will position us to expand our addressable market and technology leadership with Ruckus’ fast-growing wireless LAN products, and supports our vision to deliver market-leading New IP solutions that enable the network to become a platform for innovation,”

The company reported a revenue of $591m for the third quarter, up 7% compared to the same period a year earlier.

While its SAN product revenue was down 9% to of $282m in the July-September quarter year-over-year, IP Networking product revenue went up by 36% to $209m, including $73m of product revenue from Ruckus Wireless.

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