Market Overview

Extreme Networks Is The Next Major Networking Player

Extreme Networks Is The Next Major Networking Player
Related EXTR
Earnings Scheduled For November 2, 2018
Extreme Networks Experienced A Challenging Quarter, Cowen Downgrades Stock
Cisco Q1 Earnings: Even Better Than Last Quarter (Seeking Alpha)

Extreme Networks, Inc (NASDAQ: EXTR) announced plans to purchase data center switching, routing and analytics assets that are currently part of Brocade Communications Systems, Inc. (NASDAQ: BRCD) (Sell Rated) from Broadcom Ltd (NASDAQ: AVGO), following the sale of Brocade to Broadcom next quarter.

This deal could make Extreme Networks the “next major networking player,” Wunderlich’s Matthew S. Robison said in a report. While maintaining a Buy rating on the company, the analyst raised the price target from $8 to $9.

The Deal

Extreme Networks has offered $55 million for the SRA assets. While $35 million would be paid at closing, the rest would be paid over the next five years, with potential for additional earnout amounts.

“Broadcom is a key supplier to Extreme and the SRA business lines; we view the low multiples of the deal to be in the strategic interest of Broadcom to ensure a customer with scale and strength,” Robison commented.

While the SRA facilities are located similarly to Extreme, in San Jose and Bangalore, India, customer types are also similar, albeit with greater federal concentration. The analyst added, however, that the SRA assets “address different uses than Extreme or those of the pending Avaya asset purchase.”

The SRA purchase is expected to close in early the fiscal first-quarter of 2018 and are expected to generate annual revenue of ~$230 million, with margins that are higher than the near-term corporate average targets. “We believe strategic interest in Extreme as an SRA buyer makes it is less subject to competitive bids than the Avaya purchase from bankruptcy,” Robison wrote.

Related Links:

Extreme Networks Signs Agreement To Purchase Avaya's Networking Business

Mid-Morning Market Update: Markets Edge Higher; Lululemon Issues Weak Forecast

Latest Ratings for EXTR

Aug 2018Cowen & Co.DowngradesOutperformMarket Perform
Aug 2018JMP SecuritiesMaintainsMarket OutperformMarket Outperform
Aug 2018NeedhamDowngradesBuyHold

View More Analyst Ratings for EXTR
View the Latest Analyst Ratings

Posted-In: Analyst Color Long Ideas News Price Target Reiteration Analyst Ratings Movers Tech Best of Benzinga


Related Articles (BRCD + AVGO)

View Comments and Join the Discussion!

Latest Ratings

CPAImperial CapitalDowngrades68.0
PRMWImperial CapitalInitiates Coverage On18.0
TGTKeyBancInitiates Coverage On110.0
QCOMMorgan StanleyUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

UBS Upgrades ConocoPhillips On 'Materially Accretive' Divestiture

7 Biggest Price Target Changes For Thursday