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Extreme starts anew after Enterasys buy

New CEO ready to scale up investments in key markets, operations

By , Network World
November 26, 2013 12:29 PM ET

Network World - Now that Extreme Networks has closed its acquisition of Enterasys, it's time to focus on the task at hand as a company twice its previous size.

Both Extreme and Enterasys had annual revenues around $300 million pre-merger. Extreme now has more credibility as a $600 million company with twice the market share in Ethernet switching – 2.4% of the $20 billion worldwide market, good for a No. 4 ranking, according to Dell’Oro Group.

[ETHERNET CONSOLIDATION: Extreme snaps up Enterasys for $180 million]

Previously, Extreme and Enterasys were well down in the pack, holding 1.1% and 1.3% respective shares in 2012. With the merger they go from the ranks of Alcatel-Lucent, Avaya and Netgear to Juniper, Huawei and Dell.

Extreme actually leapfrogs Dell, Brocade, IBM and DLink in the market share rankings with the Enterasys acquisition, according to Dell’Oro.

Chuck Berger
Extreme CEO Chuck Berger: Opportunity to buy Enterasys came during his first week on job

“Competing in the switching space as a $300 million company is extremely challenging because you just don’t have enough scale to invest in R&D and marketing across the breadth of the product line,” said Extreme’s new CEO Chuck Berger in an interview with Network World. “Our P&L (profit and loss) wouldn’t afford investing in certain product areas. Getting scale and a market share position that gave us credibility was extremely important.”

In addition to scale and market share, Extreme inherits a customer base and fills two “very large product gaps very well,” Berger says: wireless and network management.

Extreme currently has an OEM arrangement with Motorola for WLAN gear that is less than ideal, according to Berger. Motorola competes with its OEM customers and offers margins that are less appealing than if the customer owned the WLAN product it resells.
Brocade recently ended an arrangement with Motorola, opting instead to resell Aruba WLAN gear .

Enterasys had an OEM relationship with Trapeze Networks before inheriting WLAN access points, switches and controllers through a $550 million joint venture with Siemens Enterprise Communications in 2008.

And Enterasys was always renowned for its network management, secure switching and network access control (NAC) capabilities. Berger was particularly impressed with Enterasys’ NetSight network management system, which provides a centralized, policy-based single-pane-of-glass view and control of the wired/wireless campus infrastructure.

Extreme plans to migrate current users of its Ridgeline management system over to NetSight after the next release of Ridgeline.

And the Enterasys switches – those of the “K” and “S” series – have an internally developed ASIC called CoreFlow2 which provides deep packet inspection to enable them to deliver actionable data to NetSight and enforce its NAC policies.

Berger said Extreme is still undecided on whether it will continue development of the CoreFlow2 ASIC beyond a next-generation of upcoming switches. Both Extreme and Enterasys switches are built with Broadcom chipsets, and if merchant silicon can replicate the capabilities of CoreFlow2 there may be no need to continue the ASIC’s development after this next release.

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