Avaya's decision to sell its networking business to Extreme Networks will likely benefit Avaya customers -- many of whom will be in a strong position to negotiate better deals with the new supplier, analysts said.
Avaya announced last week it planned to sell its networking assets to Extreme for $100 million. The deal is part of Avaya's ongoing reorganization, which started in January when it filed for bankruptcy protection from creditors. The court overseeing the process will have to approve the sale of Avaya networking products, and it could consider a higher bid if one surfaces.
Now that Extreme wants Avaya networking products, companies using the latter should not give up on the technology they have or plan to deploy until they have a "serious conversation with Extreme," said John Burke, an analyst at Nemertes Research, based in Mokena, Ill.
"For these smaller network vendors, there is strong incentive to retain customers, since retention is hugely easier than acquisition, and the technology is very interesting and innovative," he said.
Matthias Machowinski, an analyst at IHS Inc., based in Cambridge, Mass., agreed there's no reason to panic.
"If you're only doing minor upgrades or expansions, continue as is," he said. "But if you're planning major network upgrades, you should really wait until the deal goes through and an integrated product roadmap has been developed. This will take several months."
Avaya networking products include switches and network management and access-control software. The portfolio also has a software-defined networking suite, Fabric Connect, which many industry analysts consider good technology. Nevertheless, networking is only a small percentage of Avaya's business. The majority of the company's revenue comes from its unified communications and contact-center products.
"Extreme is a network company first and foremost," Burke said. "For Avaya, networking was always an adjunct and value add for the UC and contact-center businesses."
Avaya a 'reluctant' networking provider
In 2009, Avaya got into the networking business through the $900 million acquisition of Nortel's enterprise division. Avaya bought the unit for its IP telephony business.
"Avaya was always a reluctant data networking provider," Machowinski said.
Founded in 1996, Extreme Networks has its roots in the data center and campus switching. In 2013, the company added wireless LAN to its portfolio with the $180 million acquisition of Enterasys. Last year, it fortified that business when it purchased Zebra Technologies Corp.'s WLAN operations for $55 million.
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