This tech company’s shares have just crossed over their 50-day moving average, a bullish indicator. The company is continuing to buy back shares, and just increased its authorization.
Brocade Communication (BRCD)
From The Buyback Letter
Brocade Communication (BRCD) is the San Jose, Calif.-based maker of networking gear. The company makes switches and routers that big companies use in their own data centers and server rooms, as well as storage area networking (SAN), providing fast links between data storage and servers. Its competitors are networking giant Cisco Systems and Hewlett Packard Enterprises. We last bought and sold it in 2008.
Brocade made a $1.5 billion deal earlier this month to acquire wireless Internet supplier Ruckus Wireless, which will allow the company to offer complementary products and services, including wireless mobile connectivity, data storage, and data center networking hardware. Brocade said the deal adds, “Ruckus’ higher-growth, wireless products to Brocade’s market-leading networking solutions.” Ruckus’ strength in the Wi-Fi market should also help to expand Brocade’s business with service providers. But the acquisition may most strongly impact Brocade’s efforts to grow its Internet of Things (IoT) emerging market 5G mobile services, and smart cities -- all which have huge potential upsides as the world matures into a digital, data-driven marketplace.
“We’re positioning ourselves to lead where technology is headed,” said Brocade CEO Lloyd Carney in a statement.
Brocade is sure that tech is headed to the wireless, mobile edge of modern corporate networks, as companies move at least some if not all of their operations to the cloud, and users increasingly use mobile devices to access them.
Among Brocade’s other 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.
At the same time, 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 to facilitate the repurchase of all shares issued for the Ruckus acquisition, the company said.
Upon completion of the acquisition in Q3, Brocade said it will be the top storage area networking (SAN) provider, a market that generated $347 million of last quarter’s $574 million in total revenue. Brocade beat analyst estimates for both revenue and earnings in its fiscal Q1 report earlier this year. Its business outlook was in line with analyst expectations and suggested more growth ahead.
Management has reduced its shares outstanding by about 5% in the past 12 months.
David R. Fried, The Buyback Letter, www.buybackletter.com, 888-289- 2225, April 13, 2016