Wireless Vendor M&A: Who's Next And What Does It Mean For Partners?

The State Of Wireless In 2016

Is there any room left in the IT industry for a wireless pure-play vendor? And how big of an impact will wireless vendor consolidation have on solution providers?

As Brocade Communications unveils plans this week to acquire Ruckus Wireless for an estimated $1.2 billion, channel partners and analysts weighed in on market consolidation and whether it will have a negative or positive impact on solution providers.

Ruckus is among a host of wireless vendors that have been snatched up by larger companies over the past 12 months, including then-Hewlett-Packard buying Aruba Networks for $3 billion and security vendor Fortinet acquiring Meru Networks for $44 million.

Analysts and partners shared with CRN the pros and cons of vendor M&A for the channel, and predicted which wireless vendor is next in line to be acquired.

What Are The Negative Impacts Of Wireless Consolidation?

Lack of Wi-Fi innovation -- because wireless is no longer the primary focus of the company -- is one of several possible negative impacts to the channel when a wireless vendor is absorbed by another, typically larger, vendor, analysts and solution providers suggested. Larger vendors also typically have a much higher number of channel partners, so differentiation in the market can become an issue, they said.

Gary Berzack, chief technology officer and chief operating officer of New York-based eTribeca, a solution provider and Ruckus partner, said there can also be missteps in the process of integrating two companies' products.

"If the product is good, customers stay," said Berzack. "If you have a misstep, as we saw in Meru, or a misalignment, as we've seen in some pricing models, then they dissolve. They just disappear. It depends on the synergy of the acquisition."

What Are The Channel Benefits Of Wireless Consolidation?

Overall, analysts and partners said they believe wireless consolidation will benefit the channel by enabling partners to land bigger deals and higher margins.

"For channel partners, selling niche point products that do one thing gets more and more difficult, especially in the era of digital, where architectures become more important," said Zeus Kerravala, principal analyst at ZK Research based in Westminster, Mass. "Partners want to provide more infrastructure and a bigger solution."

Barry Shevlin, CEO of Vology, a Tampa, Fla.-based solution provider that partners with both Brocade and Ruckus, said there were previously too many wireless offerings in the market, and consolidation makes network solutions easier to sell.

"It just makes more sense when you've got them tied in with one of your primary LAN/WAN vendors," said Shevlin. "It makes the solutions easier and more elegant."

Where's The Sweet Spot?

The sweet spot is when a wireless vendor gets acquired by a company that has matching channel partners, which makes selling both solutions easier.

Vology's Shelvin, who partners with Brocade and Ruckus, said he expects his revenues to increase once the acquisition is complete. "It's going to make the sales process easier once it's integrated," he said.

Can An Acquisition Be Successful Without Matching Channel Partners?

When HP announced its intention to acquire Aruba last year, many Aruba partners sought out other wireless vendors. Vendors such as Meru and Ruckus said they saw a massive influx of Aruba partners seeking to jump ship.

According to eTribeca's Berzack, HP did a "superb job" of holding onto Aruba partners and customers over the last year.

"[When the acquisition happened], I was at the conference and there was not one person there who wasn't looking around to see what the alternatives was -- from distribution, from ownership, etc. [HP] did a superb job over the last 12 months on maintaining the client base and the partners," said Berzack.

Who's Next To Be Acquired?

Both analysts and partners pointed at some of the few wireless vendors left on the market -- Aerohive Networks, Xirrus and Mojo Networks.

Said ZK Research's Kerravala: "The acquisition of Ruckus does present an opportunity for those guys like Xirrus and Mojo to cut some deals and at least partner with some of the other wired infrastructure vendors -- Dell, ALE Enterprise, Juniper [Networks] -- none of those companies have their own wireless infrastructure. They've historically used a combination of Aerohive, Ruckus and Aruba. Now two of those three have been acquired."

Kerravala said Xirrus' niche is its high-density Wi-Fi offer, but more and more vendors are starting to accommodate that as well. Mojo is a cloud-managed wireless vendor, and although the market has rapidly moved to the cloud, Kerravala said, simply moving the controller into the cloud doesn't give too much value to the customer.

"You want to make yourself very non-niche," said Kerravala.

Who Will Be The Last One Standing?

If there is going to be one profitable wireless vendor standing in a few years, many pointed out, that vendor is Aerohive.

"Over the last 20 years, no solid Wi-Fi company that has good market share and, in today's terms, at least a valuation of $1 billion stands alone for very long -- currently the exception is Aerohive," said Berzack.

On Tuesday, Sunnyvale, Calif.-based Aerohive launched significant updates to its networking portfolio by launching new 802.11ac Wave 2 access points alongside a new line of switches. Aerohive hadn't launched new switches in years, and solution providers said the vendor is starting to branch out and offer more holistic solutions.

But partners also suggested that Dell might have its eyes on Aerohive for a possible acquisition in order to better compete against HP-Aruba. Last year, Dell and Aerohive announced that Dell would resell Aerohive's solutions worldwide.