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Extreme Networks coughs $180m for 'no overlap' rival Enterasys

Doubles customer base without treading on own toes, reckons beancounter

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Plucky upstart Extreme Networks has swallowed the larger, privately held Ethernet switching player Enterasys Networks for $180m in cold hard cash - and some shares.

The buy makes Extreme the fourth largest Ethernet switching maker on the planet in revenue terms, behind Cisco, HP and Huawei, according to ZK Research.

NASDAQ-listed Extreme said the the Enterasys buy will add some circa $340m top line revenues (PDF) to its $300m sales engine.

Both companies promised to "support" product roadmaps to "protect the investment of customers and avoid any disruption to businesses".

Extreme said its network OS will include features available in the Enterasys' network OS and hardware platform within two years.

The 900 staff at Enterasys will add to the 758 at Extreme. CEO Chuck Berger is to be remain at the top, and his counterpart Chris Crowell will retain a high profile role yet to be revealed.

The sale of Enterasys signals the end of the road for Cabletron Systems, a once mighty biz that raked in $1bn a year at its peak.

It split into four in the year 2000, creating Riverstone Networks, Aprisma Management Technologies, Global Network Technology Services and Enterasys.

Lucent snapped up Riverstone, GTNS was shuttered and CA came in for Aprisma MT.

ZK Research said a number of smaller players below the big three were fighting for relative scraps of business.

"There are simply too many vendors for whatever share remains after Cisco and HP take their chucks, so consolidation is sorely needed," said analyst Zeus Keravala.

However, he reckons the deal is all gravy for Extreme because it doubles its customer base "with almost no overlap".

The transaction - which Extreme funded with cash reserves and by borrowing $75m - marks a hefty loss for Enterasys owner, the Gores Group, which itself took the company private in 2006 for $386m.

The Gores Group also took a majority stake in Siemens Enterprise Communication in 2008, but the plan to create an "end to end UC" player with Enterasys clearly didn't work. ®

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