SAN JOSE -- Brocade Communications said Monday it will acquire Ruckus Wireless in a $1.5 billion deal that gives it "an onramp" from the wireless edge of the modern network to Brocade's products in the corporate datacenter.
"We're positioning ourselves to lead where technology is headed," said Brocade CEO Lloyd Carney in a statement.
And one place it's headed is the wireless, mobile edge of modern corporate networks, as companies move some or all of their operations to the cloud and users increasingly access them from mobile devices.
The news sent shares of Sunnyvale-based Ruckus, a global supplier of advanced wireless devices, soaring 32 percent to $13.20 in trading Monday, while Brocade's fell 14 percent to $9.14.
Excluding cash, the deal is valued at approximately $1.2 billion. It's a major move by Brocade, of San Jose, to deal with a fast-changing marketplace.
Brocade and Ruckus have been working side by side on various projects for the past two years. They separately provided the networking switches and wireless hookups for the city of San Jose, and recently for Sacramento's Golden 1 Center arena.
"That's when we realized there's a lot of complementarity" between the two companies' products, said Ruckus CEO Selina Lo. "We looked at what's coming down the road and saw that an ability to offer a complete solution is very attractive."
Under Carney, who took over Brocade in 2013, the networking company has been gearing up for what it calls "the New IP" -- a set of technologies and trends that are reshaping the old private, closed corporate network in response to growing needs of mobile computing, social media, the cloud and big data.
Among its recent acquisitions are Riverbed's SteelApp cloud and e-commerce business unit, and Connectem, a mobile and cloud computing company
Wireless has become "the new edge of the network, and the edge is the onramp to the data center," said Brocade senior vice president Jason Nolet.
"The IT network used to be a cost center and a necessary evil, but now it has moved to be a core competency for many companies," he said. "Customers are looking to evolve their network infrastructures to be more agile, more capable of supporting innovation in their businesses."
The merger "is definitely a good thing" long-term for Brocade in expanding its wi-fi service segment, said analyst Mitch Steves of RBC Capital Markets.
The merger should help position the San Jose networking company for the eventual adoption of 5G, he said, but it will be up against major strategic vendors like Nokia, Alcatel, Ericsson and Cisco Systems.
The Ruckus group will be led by Lo, who will report directly to Carney.
Shareholders will receive $6.45 in cash and 0.75 shares of Brocade common stock for each share of Ruckus common stock. The transaction values Ruckus at $14.43 a share based on Brocade's price on April 1.
Brocade also announced that its board of directors has increased its stock repurchase program by $800 million, bringing it to a total of $1.7 billion. The increase is intended to facilitate the repurchase of all shares issued for the Ruckus acquisition, the company said.
The companies expect the transaction to be completed in the third quarter of this year.
Contact Pete Carey at 408-920-5419. Follow him at Twitter.com/petecarey.