Extreme Networks has announced that it will buy cloud management vendor Aerohive Networks, in a deal reported to be worth $272m in enterprise value.
The vendor claims that Aerohive's cloud managed networking portfolio will strengthens Extreme's portfolio of wireless LAN networks, edge applications, and boost subscription revenues.
Commenting on the buy-out, the California-based firm said: "At a time when many of Extreme's customers and partners are turning toward as-a-service and subscription models to reduce costs and gain efficiencies, Aerohive will expand Extreme's mix of revenues to approximately thirty per cent from subscription recurring revenue."
Extreme Networks says that the acquisition also reflects its long-term strategy to strengthen its SD-WAN capabilities.
"It [the acquisition] will strengthen Extreme's position in wireless LAN at a critical technology transition to Wi-Fi 6."
It claims that the SD-WAN market will have a CAGR of 19 per cent in 2019 through to 2022.
The details of the deal will involve Extreme Networks buying all of the outstanding shares of common stock of Aerohive at $4.45 per share in cash.
Fellow Californian firm, Aerohive Networks, claims it has a global footprint of 30,000 cloud wireless LAN customers.
Its sale to Extreme Networks is better news for investors than what they've been hearing recently.
In May, the network vendor's shares fell thirty per cent, and have still not recovered.
Its Q3 2019 results disappointed Wall Street, with revenues dropping four per cent year on year to $250.9m.
As a result, the vendor's board issued a weak fourth-quarter guidance.
In an earnings call, CEO Ed Meyercord pointed the finger at headwinds in the EMEA market.
"In Europe, macroeconomic issues are affecting demand, particularly in Germany where the uncertainty of Brexit is affecting manufacturing exports," he said.
"This began to take effect in Q3 and is leading us to be more conservative in our outlook for the next quarter."
Extreme Networks says it expects its acquisition of Aerohive to add value to non-GAAP earnings per share starting in its fiscal year 2020.
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