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Why Did Brocade’s IP Networking Business Revenue Rise in Fiscal 4Q16?

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IP Networking revenues rose 51% YoY

In fiscal 4Q16, revenues from Brocade Communications’ (BRCD) IP Networking business rose 51% YoY (year-over-year) and included $96 million from the acquisition of Ruckus Wireless (RKUS). Brocade’s IP Networking product revenue was $256 million—a 22% QoQ (quarter-over-quarter) rise. Brocade completed the acquisition in fiscal 3Q16.

This high growth in fiscal 4Q16 was partially offset by a fall in service provider sales as well as sales in the education sector. In fiscal 2016, Brocade’s IP Networking business segment revenue rose 21% YoY to $730 million driven by the acquisition of Ruckus and partially offset by lower SP (service provider) revenue and US federal sales.

The above chart shows that IP Networking product revenue accounted for 29% of total revenues in fiscal 4Q15, 35% in fiscal 3Q16, and 39% in fiscal 4Q16.

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Brocade completed Ruckus acquisition in May 2016

In May 2016, Brocade Communications Systems (BRCD) announced that it had completed the acquisition of Ruckus Wireless (RKUS). This acquisition will help Brocade become a pure-play networking company.

With the acquisition of Ruckus, Brocade can now pursue opportunities in emerging markets (EEM) like India (INDA) and China (FXI). Its target segments in these markets include 5G mobile services, the IoT (Internet of Things), Smart Cities, and the convergence of LTE (long-term evolution) and Wi-Fi technologies.

At the time of the acquisition, Brocade’s Chief Executive Officer Lloyd Carney stated: “The combined company will be able to deliver superior focus and speed of innovation and best-in-class solutions spanning the full spectrum of networking. Our combined world-class portfolio now provides customers with greater flexibility in meeting today’s infrastructure requirements, including high performance, flexible, secure access networks.”

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