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Extreme Networks acquires Aerohive in cloud subscription play

Extreme Networks acquires Aerohive in cloud subscription play

Acquisition will add “critical cloud management and edge capabilities”

Ed Meyercord (Extreme Networks)

Ed Meyercord (Extreme Networks)

Credit: Extreme Networks

Extreme Networks has acquired Aerohive Networks in a $272 million deal designed to add cloud management and edge capabilities through subscription revenue.

Terms of the agreement will see Extreme take control of all outstanding shares in the Wi-Fi vendor at $4.45 per share in cash, representing an aggregate purchase price of approximately $272 million.

Accounting for Aerohive's net cash balance of $62 million at the end of March, the deal is equivalent to an enterprise value of $210 million.

“The acquisition of Aerohive establishes our leadership in cloud, artificial intelligence and machine learning, adding a proven and mature cloud services platform and subscription service model for Extreme's customers and partners,” said Ed Meyercord, president and CEO of Extreme Networks.

“Extreme continues to invest in software and AI to expand the automation capabilities across our portfolio of edge-to-cloud networking solutions. The ability to improve user experiences, lower operating expenses, and deliver cloud-managed networks is key to our strategy.”

According to Meyercord, the acquisition will add “critical cloud management and edge capabilities” to Extreme's portfolio of "end-to-end, edge to cloud networking solutions".

Furthermore, Meyercord said the transaction will provide a “strong subscription revenue stream”, while strengthening the vendor’s position in wireless LAN as a “critical technology transition” to Wi-Fi 6.

“After scaling Extreme's business to $1 billion in revenue and expanding our portfolio to include end-to-end enterprise networking solutions, we are now taking the next step to transform our business to add sustainable, subscription-oriented cloud-based solutions that will enable us to drive recurring revenue and improved cash flow generation,” Meyercord added.

With expertise in cloud management, Aerohive was among the first vendors to offer controller-less Wi-Fi and cloud network management, including cloud-managed Wi-Fi and network access control (NAC). Today, the business is ranked second in the cloud managed wireless LAN services market.

“This acquisition by Extreme is a major milestone for Aerohive,” said David Flynn, president and CEO of Aerohive. “The role that cloud-managed technology plays in modern enterprises is impossible to overstate - it is where digital transformation is won and lost.”

Aerohive has a global footprint of 30,000 cloud wireless LAN customers in verticals including education, healthcare, state and local government and retail.

Flynn said the acquisition will also bring new automation and intelligence capabilities to Extreme's Elements portfolio, backed by expanding expertise in Wi-Fi and NAC.

“Aerohive's expertise and excellence in cloud management and edge technology, combined with Extreme's extensive solutions portfolio and continued investment in software and AI for automation, gives our customers the most advanced digital experiences in the market,” Flynn added. “Together we will push networking into a new era - making infrastructure smarter, more autonomous, and the driver of business value.”

Alongside enhanced SD-WAN capabilities, the acquisition comes at a time when Extreme's customers and partners are turning toward as-a-service and subscription models. As a result, Meyercord said Aerohive will expand Extreme's mix of revenues to approximately 30 per cent from subscription recurring revenue.

“Extreme expects this deal to be accretive to our FY20 outlook as it accelerates our plans to achieve over 60 per cent gross margin and 15 per cent operating income on an exit run rate,” Meyercord explained.

“As we close out our fiscal fourth quarter 2019, we are confident in our guidance and continue to see strong wins in the market across our product portfolio, in cross-selling opportunities, and targeted industry verticals in all of our geographies, along with improved linearity.”

With Aerohive, Meyercord said Extreme will also offer customers and partners "more choices" for cloud and on-premises wired and wireless technology. Post-acquisition, customers and partners of both vendors will be able to "mix and match" a broader ranger of software, hardware and services.


Tags NetworkingWi-Fiextreme networksAerohive Networks

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