Extreme Networks is poised to potentially acquire Avaya's networking business for $100 million (subject to potential adjustments). The pending deal comes as Avaya strives to strengthen its balance sheet amid its chapter 11 bankruptcy filing. Extreme, meanwhile, potentially gains economies of scale in the highly-competitive networking sector.
Update, March 8, 2017: Extreme is the primary bidder for Avaya's Networking asset, and the deal is not final. Other interested parties will be provided the opportunity to submit bids prior to a deadline set by the Bankruptcy Court. If other qualified bids are submitted, an auction process will be conducted, in which the agreement with Extreme would set the floor value for the auction, according to a spokesperson.
No doubt, both companies are looking for ways to boost their customer appeal. Extreme's Q2 2017 revenues were $148.1 million -- up only about $2 million from Q2 2016. The company had an $8.6 million Q2 2017 net loss loss, compared to a $7.2 million quarterly loss in Q2 2016.
Like just about every other network hardware provider, Extreme now evangelizes its "software-driven" networking solutions, including wireless and wired solutions. But in some ways, the company lacks the economies of scale of giants like Cisco Systems and HP Enterprise's Aruba division. Extreme must also compete with fast-growing hypercongered infrastructure (HCI) startups like SimpliVity (which HP Enterprise is acquiring) and Nutanix (which partners closely with Lenovo and other hardware giants).
Extreme has also promoted a channel-friendly approach to the market -- spanning from the company's home-grown products to last year's Zebra Technologies acquisition.
Avaya, meanwhile, potentially gains some much needed dollars and cents to help lighten the company's debt load. Company leaders insist Avaya has performing well even as the company navigates its chapter 11 bankruptcy. And partners like ScanSource have offered Avaya a vote of confidence. But Avaya retirees, in particular, have been tracking the bankruptcy closely to see if it triggers any changes to Avaya's pension plans.
Avaya and Extreme Networks have partnered on a range of engagements for more than a decade. Iowa Valley Community College District, for instance, deployed Avaya and Extreme gear in 2008 to improve the college's overall network infrastructure. I don't know if that college continues to leverage both companies' gear.
If Extremes emerges as the finalized buyer, the transaction is expected to close by June 30, 2017, the end of Avaya’s fiscal third quarter 2017, subject to regulatory approvals and other customary closing conditions.
