Extreme Networks Inc. (NASDAQ: EXTR) saw its shares jump early on Thursday after the company announced that it will be acquiring the data center networking business from Broadcom Ltd. (NASDAQ: AVGO) following its acquisition of Brocade.
Brocade’s data center networking business will be sold to Extreme for $55 million in cash, consisting of $35 million at closing and $20 million in deferred payments, as well as additional potential performance-based payments to Broadcom to be paid over a five-year term.
Extreme has been looking to expand its portfolio of data center, core, campus and edge networking solutions over the past six months.
Back in October 2016, the company closed its acquisition of the wireless LAN business from Zebra Technology, which is expected to generate over $115 million in annualized revenue. Earlier this month, the company announced that it entered into an agreement with Avaya to be the stalking horse bidder to acquire its networking business in an auction process. The transaction remains subject to customary closing conditions and regulatory approvals and is currently anticipated to close within two to three months. Extreme expects the Avaya business to generate over $200 million in annualized revenue.
Ed Meyercord, president and CEO of Extreme Networks, commented:
The addition of Brocade’s data center networking business significantly strengthens our position in the expanding high-end data center market and reinforces our strategy of delivering software-driven networking solutions focused on enterprise customers. As Extreme is the only pure-play end-to-end, wired and wireless enterprise IP networking company in the world, we believe Brocade’s data center customers will benefit from our dedication to delivering high-quality, software-driven, secure networking solutions and the industry’s highest rated customer support. Today’s announcement, coupled with our recent announcements regarding our position as the stalking horse bidder of Avaya’s networking business and the successful completion of the integration of Zebra’s wireless LAN business, along with Extreme’s organic investments in R&D, will result in a state-of-the-art, newly-refreshed portfolio of enterprise solutions for our customers.
Shares of Extreme Networks closed Wednesday down 1% at $6.46, with a consensus analyst price target of $7.88 and a 52-week trading range of $3.02 to $7.11. Following the announcement, the stock was up 19% at $7.69 just after Thursday’s opening bell.
Broadcom traded up 0.4% at $222.11, with a consensus price target of $247.83 and a 52-week range of $139.18 to $227.75.