Partners 'Bewildered and Confused' By Broadcom's $5.9B Acquisition Of Brocade-Ruckus
Steven Burke And Jimmy Sheridan
Semiconductor maker Broadcom's $5.9 billion acquisition of Brocade Communications Systems including Ruckus Wireless has left solution provider partners of the highly-prized networking business dazed and confused.
Partners said Broadcom's decision to publicly announce plans to divest the Brocade and Ruckus IP networking business has opened the door for customers to hold off on purchases. They said the divestiture creates uncertainty that is sure to impact the channel.
"The way they handled this could stop sales dead in their tracks," said the CEO for a top Ruckus partner who did not want to be identified. "The issue becomes if you are hotel buying a mission-critical wireless solution, you just had the company say it doesn't know what they are going to do with the networking business. I am surprised. If this was Ruckus I am sure we would have gotten some information on this. I am not sure why, but they don't seem to be concerned about what the market is going to do with the lack of information on Ruckus and Brocade. If they cared about the asset, I would have thought they would have treated it with more respect."
The CEO for another top Ruckus partner, who did not want to be identified, said he was simply "bewildered and confused" by Broadcom's plan to divest the Brocade networking business "My bet is Ruckus and Brocade are in shock themselves and don't know what to say," he said. "I have spent the day in a daze. It takes a lot to rock the ship when you have a brand like Ruckus and an army of resellers who are dedicated and passionate about them. But I have grave concerns when I see somebody like Broadcom say, 'We'll figure it out later.' It seems like partners are being left out in the cold. I understand if I am Broadcom the acquisition of the networking business puts them in competition with some of their biggest customers. They could never embrace Brocade. It just would have been nice to have a more thoughtful transition."
Broadcom CEO Hock Tan said the acquisition, which was announced Wednesday morning, strengthens the company's position as one of the "leading providers of enterprise storage connectivity solutions to OEM customers." Furthermore, he said Broadcom is "confident" that it will find a "great home" for Brocade's networking business.
Sources close to Brocade and Ruckus, meanwhile, told CRN that top executives in the networking business are already in talks to sell the networking business and find it a "good home" for employees and partners as soon as possible.
Brocade Senior Vice President of Worldwide Sales Jeff Lindholm told partners in an email that "Brocade's intention is to assist Broadcom in finding a buyer that will continue to invest in the strong portfolio that Brocade created."
"Partners remain key for our future success and we will continue to build on the foundations and momentum of our partners as together, we march towards our strategic vision to deliver open platforms for innovation, said Lindholm in the email. "During this transition process, it is business as usual. Our primary objective is to make sure that our partners and customers will continue to benefit from our best in class data center, wireless and wired edge, and software infrastructure solutions without disruption."
One source close to Broadcom said the networking business competes head on with some of Broadcom's biggest OEM customers including Cisco and Hewlett Packard Enterprise. "Broadcom is in a semiconductor market that is consolidating and is focused on driving profits in a business that used to be characterized by long term investment in technology. They saw a value in Brocade that nobody else saw with a vertical integration that looks at the business in a different way and could have tremendous financial benefits."
Gary Berzack, CTO and COO of New York-based eTribeca, one of the most widely-respected wireless solution providers in the country, said the Broadcom and Brocade team need to move quickly to clear up the uncertainty in the channel.
"They need to lay out a road map, lock up senior key management of Ruckus and Brocade and pull together a partner and channel plan that keeps us selling and profitable," said Berzack. "There are over 6,000 Ruckus partners who are waiting for some communication on this. There is clearly more to come here."
Additional reporting by Jimmy Sheridan.