US cable technology firm Arris is in discussions to acquire a slice of the networking business from Broadcom’s Brocade Communications, and is willing to pay a sum exceeding $1 billion, accord-ing to Reuters. Could this be Arris admitting that the future of the set top is bleak, and wireless is the way forward? We think so, and so does the Arris CFO.
Arris has been wanting to get into wireless for a while now – a business venture which would almost complete its portfolio and leave it well placed to battle in this field with fierce rival Cisco, who exited the set top business last year with a $600 million sale to Technicolor. But Cisco kept the profitable parts of that business, namely it CCAP business, where it goes head to head with Arris.
Arris’ customers are increasingly investing in wireless, so it was only a matter of time before it had to adapt. Comcast and Charter wireless are hunting MVNO deals, and the proliferation of WiFi hotspots is gathering pace and that has led to supply deals with companies like Nokia.
Which is why the US equipment manufacturer wants to buy the networking edge business of Brocade, leaving its other assets, including data center and switching software, untouched, suggest-ed Reuters.
Questions have been raised about the future of Ruckus, which Brocade only acquired late last year, and Faultline Online Report-er suggested at the time that it offered an attractive prospect for Arris, which has to deal with WiFi every time it installs a home gateway. Ruckus is the “de facto” market leader in “carrier WiFi.”
Broadcom snapped up Brocade last year for $5.9 billion, and the reason Broadcom wants to sell off the networking edge section of the Brocade business is so that it won’t have to butt horns with some of its top customers in this field – namely Cisco. It also has overlaps with a chunk of that business.
Arris has the cash to spend too, reporting Q3 net income up 75% $146.7 million. Its network and cloud business now accounts for 31% of revenues at $1.6 billion, and its CPE business pulled in almost $3.5 billion.
Just last week Arris CFO Dave Potts essentially prepared us for news of a wireless deal, speaking at the Needham Growth Conference: “As we continue to grow, we believe it’s possible we could get into adjacent markets, which could mean, as an example, wireless. What happens to wireless over time – should we be more heavily into that? We’re always
Potts added, “we continue to see some of the supply chain issues we’re trying to get through, but I’d like to think the Pace deal is behind us. We’re in the midst of an upgrade cycle that is really quite big as our clients re-architect their networks. DOCSIS 3.1 is where they want to go. 3.1 and having that service inside the home.”
Want to read more? Try the Wireless Watch service now!