Ailing Avaya has revealed it will sell its networks business to Extreme Networks for about $100 million.
Avaya Inc. filed for bankruptcy protection in January amid reports that it was struggling to cope with the ongoing shift in value from hardware to software and services. (See Ailing Avaya Takes Cover From Bankruptcy.)
The company hopes to reduce its debt load through the sale of various assets but appears determined to cling on to its unified communications and contact center businesses.
However, the deal with Extreme Networks Inc. (Nasdaq: EXTR) seems unlikely to have a major impact on Avaya's balance sheet, which showed debts totaling more than $6 billion at the end of December.
Last month, Avaya reported revenues of $875 million for the final three months of 2016 -- 8.7% lower than in the same period of 2015 -- and saw its net loss widen from $27 million to $102 million over the same period.
San Francisco-based Extreme Networks said the acquisition of Avaya's networks unit -- Ethernet switches, WLAN gear, security and infrastructure management tools -- would strengthen its capabilities in the enterprise sector and provide "accretion" to its earnings and cash flow in 2018.
"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," said Ed Meyercord, Extreme's president and CEO, in a company statement. "Furthermore, we expect the Avaya business to generate over $200 million in annual revenue, increase our market share and offer new opportunities for our customers."
Extreme, a company best known for its Ethernet switching expertise but which has had a relatively low profile in the market of late, says its main focus is on providing software-based networking products and services to IT departments across a range of industry sectors.
Extreme's revenues rose by 6.3% in the last three months of 2016, to $148 million, compared with the year-earlier quarter, but the company's net loss also widened over that period, growing from $7.2 million to $8.6 million.
Avaya expects the deal to close by June this year, although competing bids from other parties could trigger an auction of the assets.
In that instance, says Avaya, the deal with Extreme would set "the floor value for the auction."
— Iain Morris, , News Editor, Light Reading