The $272 million all-cash acquisition of Aerohive Networks announced this week should result in a significantly larger presence in the channel for a combined entity that will now have a channel program consisting of more than 11,600 partners.
Extreme Networks currently has about 6,000, channel partners, while the Aerohive Networks channel program consists of roughly 5,600 partners, according to Extreme Networks CEO Ed Meyercord. During a conference call this industry analysts, Meyercord noted that there is very little overlap in terms of partners currently participating in both company’s channel programs.
Channel partners should prove critical as Extreme Networks, which today generates most of its revenues via sales of network switches, looks to extend its reach into the realm of wireless networking by acquiring Aerohive Networks.
The acquisition of Aerohive Networks comes at a time when both companies are in the process of restructuring their operations to reduce costs. The acquisition of Aerohive Networks will play a significant role in furthering Extreme Networks’ goal of being able to generate 60% gross margins, says Meyercord.
“This acquisition fits perfectly with our strategy to drive more revenue through software,” says Meyercord.
Although Aerohive Networks sells wireless points, the company generated most of its revenue via subscriptions to the cloud-based management platform through which those access points are managed. The Aerohive Networks approach is also unique in that it is based on a modern microservices-based cloud architecture that eliminates the need to deploy and manage controllers alongside wireless access points. That platform will then become the vehicle through which Extreme Networks will deliver more cloud-based services.
It’s not clear to what degree acquiring Aerohive Networks will accelerate a return to profitability for Extreme Networks. The company most recently posted a $7.2 million loss for its most recent second quarter on revenues of $252.7 million. What is clear is Aerohive Networks provides Extreme Networks with access to a branch office networking market that is one of the fastest growing sectors in all of IT. The challenge, of course, will be motivating partners to not only sell wireless networks in combination with software-defined wide area networking technologies to address that opportunity but also now a few more traditional network switches along the way.
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