Arris International (ARRS 26.79, -3.91) has tumbled 12.7% in pre-market despite beating earnings expectations for the fourth quarter. In addition to reporting earnings, Arris announced the agreement to acquire Brocade Communication Systems' (BRCD 12.41, +0.03) Ruckus Wireless and ICX switch business for $800 million in cash. The transaction is expected to be accretive to Arris' earnings within 12 months.
The deal with Brocade will expand the reach of Arris past the consumer arena into education, public venue, enterprise, hospitality, and MDU segments. The company expects to establish a unit that will be dedicated to development of innovative wireless networking and wired switching technology. Current Ruckus COO Dan Rabinovitsj will head the newly-formed unit.
As for fourth quarter earnings, the manufacturer of cable modems and other networking technology reported above-consensus earnings of $0.79 per share on a 61.1% year-over-year spike in revenue to $1.77 billion, which was ahead of expectations.
Cash generated from operating activities was pretty steady as the company generated $40 million, bringing its total cash to $1.107 billion, slightly down from $1.11 billion in the previous quarter. In 2016, Arris generated $367 million in cash after generating $344 million in 2015.
Order backlog increased to $1.106 billion from $716 million at the end of the same quarter a year ago. Gross margin fell to 24.76% from 32.56%.
Book-to-bill ratio improved on a sequential basis, increasing to 1.04 from 0.88, but was down from last year's fourth quarter ratio of 0.88.