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Extreme Networks Improves Offering with Brocade Acquisition

April 05, 2017

When it comes to companies gaining power and furthering their reach, in any industry, acquisitions are the name of the game. When one well-known company acquires and works with another well-known company, the two are setting themselves up for success. Throw three quality companies into the mix, and you have the current success story of Extreme Networks, Inc., Broadcom Limited and Brocade Communications Systems.

According to the announcement, Extreme and Broadcom have entered into an agreement that will see Extreme acquire Brocade’s data center switching, routing and analytics business from Broadcom following Broadcom’s acquisition of Brocade. Brocade’s data center networking business will be sold to Extreme for $55 million in cash—$35 million for closing and $20 million for deferred payments. There will also be additional potential performance-based payments to Broadcom that will take place over a five year period.

There’s a lot of back and forth going on here, but Extreme is an expert at the acquisition game due to its recent history. In an effort to expand its portfolio of data center, core, campus and edge networking solutions, Extreme has taken part in numerous acquisitions over the past six months. In October 2016, for instance, it closed its acquisition of the wireless LAN business from Zebra Technology Corporation, and earlier this month is entered into an agreement with Avaya to be the stalking horse bidder to acquire its networking business in an auction process.

Each former acquisition and this current endeavor with Broadcom and Brocade are sure to boost Extreme’s revenue. This acquisition alone is expected to generate over $230 million in annualized revenue. However, Extreme has other reasons for taking part in this acquisition.

Ed Meyercord, President and CEO of Extreme Networks, commented, “The addition of Brocade's data center networking business significantly strengthens our position in the expanding high-end data center market and reinforces our strategy of delivering software-driven networking solutions focused on enterprise customers…As Extreme is the only pure-play end-to-end, wired and wireless enterprise IP networking company in the world, we believe Brocade's data center customers will benefit from our dedication to delivering high-quality, software-driven, secure networking solutions and the industry's highest rated customer support.”

He continued, “Moreover, this acquisition is important as it expands our commercial relationship with Broadcom…We already have our 200 Series of value oriented switches leveraging Broadcom's FASTPATH operating system software and this transaction will only broaden our strategic partnership.  Finally, given the strong profitability of Brocade's data center business, this transaction will accelerate Extreme's objective to achieve gross margins in excess of 60 percent.”

Hopefully this acquisition will prove to be as successful for all involved as Meyercord predicts.

Edited by Stefania Viscusi

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