Extreme cleans up Brocade's networking leftovers

US networking firm Extreme Networks has acquired the datacentre switching, routing and analytics business of Brocade for $55m (£44m).

Brocade was snapped up by semiconductor vendor Broadcom in November for $5.9bn, but the buyer made clear its intention to divest Brocade's networking business - consisting mainly of its acquisitions of Foundry Networks and Ruckus Wireless - after the deal closes.

Brocade flogged Ruckus' ICX business to US comms vendor Arris International in February, and has now found a buyer in Extreme Networks for more of its networking assets.

The business will be sold to Extreme for $35m upon the deal's closure and $20m in deferred payments, in addition to possible additional "performance-based" payments to Broadcom to be paid over a five-year period.

The deal is expected to close within 60 days after Broadcom completes its buyout of Brocade, which is set to draw to a close in its third financial quarter, ending 30 July.

CEO of Extreme Networks Ed Meyercord said the deal will expand his firm's high-end datacentre proposition to enterprise customers.

"The addition of Brocade's datacentre networking business significantly strengthens our position in the expanding high-end datacentre market and reinforces our strategy of delivering software-driven networking solutions focused on enterprise customers," said Meyercord.

"Today's announcement, coupled with our recent announcements regarding our position as the stalking horse bidder of Avaya's networking business and the successful completion of the integration of Zebra's wireless LAN business, along with Extreme's organic investments in R&D, will result in a state-of-the-art, newly refreshed portfolio of enterprise solutions for our customers.

"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 datacentre business, this transaction will accelerate Extreme's objective to achieve gross margins in excess of 60 per cent."

Extreme claims that the acquisition will be accretive to cash flow and earnings for its fiscal year 2018, and expects to generate over $230m in annual revenues from the acquired assets.

"Extreme is highly complementary to our datacentre switching, routing, and analytics business on many levels, and represents a positive outcome for our customers, partners, and employees," said Lloyd Carney, CEO of Brocade.

"Our two companies have similar strategic visions and believe that innovation will increasingly be driven through software capabilities that allow customers to successfully transform their networks for digital business… We believe Extreme's desire to build on the innovation and momentum of our completely refreshed datacentre portfolio, including the new SLX family, as well as its intention to drive the ongoing success of our VDX and MLX families, will allow our customers and partners to continue to leverage the full benefits of our world-class portfolio."

Extreme Networks has been actively pursuing M&A opportunities recently. The firm put in a $100m bid for Avaya's networking business, and bought out wireless LAN vendor Zebra in September last year.

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• Topics
• Vendor
• Mergers and Acquisitions
• Brocade