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Is ARRIS (ARRS) a Step Closer to Acquiring Ruckus Wireless?


ARRIS International PLC ARRS, leading customer premises equipment manufacturer for the cable TV industry, reportedly moved one step forward to complete its proposed acquisition of Ruckus after the exit of Ruckus Wireless’ channel chief, Sandra Glaser Cheek.

In Feb 2017, ARRIS entered into a deal with Broadcom to acquire Brocade Communication Systems, Inc.’s BRCD Ruckus Wireless and ICX Switch units for $800 million. The company plans to close the agreement in fourth-quarter fiscal 2017. Notably, ARRIS’ buyout came on back of Brocade’s decision to close the acquisition of Broadcom Limited AVGO.

In fact, we believe that the acquisition of Ruckus is intrinsic to ARRIS’ plans to enter the wireless business.

Moreover, the company’s Carrier-Class Service Provider Wi-Fi Solution, currently deployed by Mediacom, integrates products from vendor partners including Ruckus, Aptilo Networks and Benu Networks.

However, in an 8-K filing to the SEC made in July, Brocade agreed with Broadcom to refile their regulatory application with the Committee on Foreign Investment in the United States (CFIUS). Consequently, both the companies are undergoing a CFIUS review, and also agreed to refile their notice to provide CFIUS more review time, given the transaction’s complexity. Therefore, Broadcom and Brocade now expect the transaction to close before the end of the fiscal fourth quarter.

In fact, the exit of Ruckus Wireless’ channel chief is kept under the close observation of many market watchers as a sign that the deal will close by the year-end as planned. Whatever be the final outcome, we expect investors’ focus to remain on the issue, going forward.

Price Performance

Shares of ARRIS have underperformed the Zacks categorized industry’s growth in the last six months. The stock declined 3.6% against the industry’s gain of 14.8%.

Zacks Rank & Stocks to Consider

ARRIS has recently inked several deals to broaden its product portfolio. Also, the company reported better-than-expected earnings in second-quarter fiscal 2017. However, customer concentration, foreign currency exchange rate risk and being a highly leveraged company remain added risks for ARRIS.

We believe these factors substantiates its Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

If you are still interested in the Communication – Components industry, you may consider Arista Networks, Inc. ANET, which is a better-ranked stock from the same space. The company currently sports a Zacks Rank #1 and might prove to be a better choice at the moment.

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