Extreme Networks to acquire Aerohive for $272M

Extreme Networks announced it will acquire Aerohive Networks for about $272 million, giving it a chance to beef up its cloud-managed Wi-Fi with advanced artificial intelligence and machine learning capabilities, among other things.

The deal also strengthens Extreme’s position in wireless LAN (WLAN) while the industry transitions to Wi-Fi 6. Extreme expects to gain new SD-WAN capabilities as well.

Aerohive was among the first companies to offer controller-less Wi-Fi and cloud network management, including cloud-managed Wi-Fi and network access control (NAC). It recently delivered a trio of Wi-Fi 6 access points. It has 30,000 cloud WLAN customers in verticals ranging from education to retail and healthcare.

The companies said the acquisition will bring new automation and intelligence capabilities to Extreme's Elements portfolio, expanding Extreme's technology leadership in Wi-Fi and NAC, adding cloud-managed Wi-Fi and NAC solutions to complement its on-premises Wi-Fi and NAC technology.

Extreme Networks had been talking with Aerohive for about the last nine months, with a lot of people looking at the companies and believing they were a good fit, according to Extreme Networks President and CEO Ed Meyercord. He told investment analysts on a conference call Wednesday that their customers are very complementary and there’s not a lot of overlap, according to a SeekingAlpha transcript.

Extreme has expanded its portfolio over the past few years to include assets from Zebra, Avaya and Brocade. Meyercord acknowledged there were execution issues in the Avaya and Brocade deals and Extreme didn’t always have full visibility on what was going on in those companies, but with Aerohive, it’s acquiring the entire company and it’s bringing over all of its systems.

“We're feeling a lot more confident in terms of the business integration and fewer surprises here,” he said, noting they’ve been working closely with Aerohive President and CEO Dave Flynn and the executive team there.

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Combined, the two companies rank third in the campus networking market (both wired Ethernet and WLAN), following western manufacturers Cisco and HPE, and fifth place including Chinese manufacturers H3C and Huawei, according to a blog post by Dell’Oro Group CEO Tam Dell’Oro. 

On first look, Dell’Oro identified the advantages of the transaction: Extreme brings a broader Ethernet switch portfolio to Aerohive customers looking to refresh both wired and wireless networks; and Aerohive brings cloud management expertise, sophisticated wireless technology, and a very loyal customer base.

Among the disadvantages, however, is it marks Extreme’s third acquisition in three years (i.e., Zebra, Brocade, Avaya, respectively), requiring operations and product consolidation, which represents an upheaval to any business. Supporting and transitioning customers’ installed equipment will require significant effort, Dell’Oro said.

The analyst added that the acquisition news follows a string of similar announcements as manufacturers position to capture the massive multi-year replacement cycle of campus networks that connect users and things–allowing access to the corporate network. Recent announcements include Arista’s launch of campus Ethernet switches and new Wi-Fi 6 access points, Cisco’s launch of its Catalyst 9K switches and Wi-Fi products, and Juniper’s acquisition of cloud managed Wi-Fi company Mist Systems.

Extreme is targeting to complete the transaction in fiscal first-quarter 2020.