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Extreme cloud makeover for enterprise WiFi

The enterprise WiFi market has been a story of consolidation for several years now. Juniper bought Trapeze back in 2010 and then Mist earlier this year; HPE acquired Aruba; Brocade bought Ruckus and sold it on to Arris; Riverbed snapped up Xirrus. The latest deal is for Aerohive, which is to be acquired by Extreme Networks in an all-cash deal for $272 million (or $210 million deal value because Aerohive has $62 million in cash).

This brings cloud-managed WiFi and network access control (NAC) products to add to Extreme’s enterprise and campus networking portfolio, which it has been expanding into areas like SD-WAN.

The combined company will have about 60,000 customers and will bolster Extreme’s number three position in the WiFi equipment market after Cisco and HPE.

The two firms are not perfectly aligned, as Extreme CEO Ed Meyercord admitted on the investor call. Aerohive is heavily focused on the educational market rather than the enterprise like its new parent. But Meyercord said Aerohive’s technologies, especially its cloud management platform, would be valuable when applied to Extreme’s offerings.

He said Extreme would also continue to invest in the core Aerohive platforms. “We want to make sure we nurture that cloud-native business,” he said.

Aerohive specializes in cloud management and controller-less WiFi access points and is ranked second to Cisco in cloud-operated WLAN, by IHS Markit. Aerohive also has an SD-WAN product targeted at medium enterprises. These products complement Extreme’s mainly on-premise approach to enterprise networks.

Extreme’s CMO Norman Rice said that Aerohive would bring “20,000 to 24,000 net new customers” in areas like retail banking, fast food restaurants and education. He added, “Extreme’s WiFi is our on-prem WiFi. Aerohive is our cloud WiFi, and Aerohive will help Extreme with the evolution of SD-WAN to SD-branch.” SD-Branch technology supports SD-WAN, routing, integrated security and LAN/WiFi functions that can be managed centrally.

Aerohive reported $33 million in revenues for its most recent fiscal quarter, down 8% year-on-year, and turned in a net loss of $8.7 million, bigger than the year-ago figure of $7.3 million.

Tam Dell’Oro, CEO of the Dell’Oro analyst firm, commented that the deal fits with recent vendor moves into the enterprise and campus networking markets, which have seen Arista launching campus Ethernet switches and WiFi 6 access points; Cisco’s launching new Catalyst 9K witches and WiFi products; and Juniper’s acquiring cloud-managed WiFi and edge company Mist Systems for $405 million.

“The campus network market is embarking on the most significant refresh cycle in over a decade and there is a lot of movement among the manufacturers as they position themselves to best capture opportunity,” Dell’Oro wrote in an analysis of the Aerohive deal. Previous Extreme acquisitions have included those of Avaya’s networking business, Brocade’s data center networking assets, and Zebra Technology.

Meyercord said, “The acquisition of Aerohive establishes our leadership in cloud, AI and machine learning, adding a proven and mature cloud services platform and subscription service model for Extreme’s customers and partners.”

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

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