Tuesday, October 17, 2017

Broadcom gets rid of Brocade’s multi-million Dollar data centre business

New owners believe deal will take them to revenues of more than $1bn and strengthen commercial ties with Broadcom.

Broadcom’s future data centre switching, routing, and analytics business arm Brocade has just sold its data centre portfolio to Extreme Networks in a deal worth $55m paid in cash.

The investment consists $35m at closing and $20m in deferred payments, as well as additional potential performance based payments to Broadcom, to be paid over a five-year term.

For Extreme Networks, the investment might pay well as the company says it expects total revenues to cross the $1bn mark once Brocade’s portfolio is merged into the business by 2018. The acquired asset is predicted to amount to $230m in annualised revenue and gross margins in excess of 60%.

However, the transaction is still contingent on Broadcom completing the $5.5bn acquisition of Brocade and would be closed up to 60 days after Broadcom completes the acquisition.

Broadcom announced its intention to buy the networking company in November 2016 with shareholders approving the M&A in January this year. Broadcom has said it expects the transaction to close before July 30, 2017, the end of its third fiscal quarter.

Ed Meyercord, President and CEO of Extreme Networks, said: “The addition of Brocade’s data centre networking business significantly strengthens our position in the expanding high-end data centre market and reinforces our strategy of delivering software-driven networking solutions focused on enterprise customers.

“This 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.”

Meyercord also said the transaction assumes an important role in its commercial relationship with Broadcom going forward.

Lloyd Carney, CEO of Brocade, said: “Our two companies [Brocade and Extreme] have similar strategic visions and believe that innovation will increasingly be driven through software capabilities that allow customers to successfully transform their networks for digital business.

“Both companies are pure-play networking providers, serving the enterprise edge to the data centre core.

“In addition, we believe Extreme’s desire to build on the innovation and momentum of our completely refreshed data centre portfolio, including the new SLX family, as well as its intention to drive the ongoing success of our VDX and MLX families, will allow our customers and partners to continue to leverage the full benefits of our world-class portfolio.”