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This Set-Top Box Maker Might Buy Brocade’s Networking Tech for $1 Billion

January 13, 2017, 7:16 PM UTC
Photograph by Getty Images

Set-top box maker Arris International is in talks to acquire Brocade Communications Systems’s networking equipment business for as much as $1 billion, according to people familiar with the matter.

A deal would enable Arris (ARRS) to offer high-end wireless broadband devices to customers. It would also ensure that Broadcom (BRCM), the chip maker that agreed to acquire Brocade in November, will not own a business that competes with its top clients, such as Cisco Systems (CSCO).

Arris is just one of the companies that Brocade is speaking to about the divestiture, and there is no certainty its bid will prevail, the people said this week. A decision is expected by the end of the month, the people added.

The sources asked not to be identified because the sale process is confidential. Representatives for Arris, Broadcom, and Brocade declined to comment.

Arris, which has a market capitalization of $5.53 billion makes electronics used by cable and satellite companies. The Suwanee, Georgia-based company closed a deal last year to buy British rival Pace for $2.1 billion, and incorporated itself in Britain in a deal structured as a corporate tax inversion.

Broadcom has announced publicly it plans to sell Brocade’s networking business, which makes controllers and access points that boost high-speed Internet for customers.

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Most of the assets of the unit for sale were obtained by Brocade as part of its $1.5 billion acquisition of Ruckus Wireless last year.

Arris is looking to buy Brocade’s network edge business, which is the most valuable of the assets being sold, according to the sources. Arris is not in talks to buy other parts of the business being divested by Brocade that include data centers, switching and software, the sources added.

Broadcom had divided up Brocade’s divestiture into three pieces after an earlier deal to sell the whole business to a private equity firm fell apart late last year, according to the sources. A private equity firm could still step up to buy all three pieces, the people said.

Broadcom, formerly Avago Technologies, is known for its connectivity chips used in products ranging from mobile devices to servers, while Brocade makes networking switches, software and storage products.