Extreme to pick up Avaya unit for $100m

Alan Burkitt-Gray
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Extreme Networks set to pick up Avaya Networks’ networking business for $100m if bankruptcy court approves

Bankrupt Avaya Networks is to sell its networking business to Extreme Networks for about $100 million.

Avaya, which filed for bankruptcy protection in January, said Extreme will be the primary bidder in a sale under the US Bankruptcy Code. The deal, if it goes through, will make only a small contribution to Avaya’s $6.3 billion debts.

Ed Meyercord, president and CEO of San Jose-based Extreme, said the acquisition will generate “over $200 million in annual revenue”. He said: “The addition of Avaya's networking business is consistent with our growth strategy and will broaden Extreme’s enterprise solutions capabilities by complementing our product portfolio across our vertical markets.”

Avaya will be left with its unified communications and contact centre products, said president and CEO Kevin Kennedy. “After extensive evaluation, we believe that a sale of our networking business is the best path forward for all stakeholders. It provides a clear and positive path for our networking customers and partners and enables the company to focus on its core, industry-leading unified communications and contact centre solutions.”

The deal is not done yet, as there will be an auction, but Extreme will be entitled to a break-up fee if it fails to buy the business. The US bankruptcy court has to approve the process.

Meyercord said: “Although our agreement is subject to required approvals, the timing of which is uncertain, we expect the combined businesses can achieve synergies and provide accretion to Extreme’s fiscal 2018 earnings and cash flow.”

Extreme Networks is a 20-year-old company that focuses on software-driven networking for enterprises and the public sector, with operations in 80 countries. Revenue in 2016 was $528 million, of which 55% was from outside the US, with a net loss of $31 million.

Avaya is also about 20 years old, having been created from the office equipment business of the former Lucent Technologies, now incorporated into Nokia. Avaya also bought the enterprise solutions business of the bankrupt Nortel for $900 million in 2009.