Extreme Networks will acquire Aerohive in an all-cash deal that will boost Extreme’s cloud native position in the increasingly competitive enterprise, campus networking, and SD-WAN space. The deal is valued at $272 million in total, though Aerohive’s $62 million cash on hand reduces the enterprise value to $210 million.

Aerohive’s products focus on its cloud-managed WiFi and network access control (NAC) products. This will add to Extreme’s position in on-premises WiFi and similar NAC technology. The combined entity will count about 60,000 customers, and will bolster its No. 3 position in the global WiFi equipment market behind heavyweights Cisco and Hewlett Packard Enterprise (HPE).

Extreme CEO Ed Meyercord said that the companies initially began discussions about nine months ago, which were tied to questions about how well their respective product and service lines aligned. Extreme’s current focus is on the enterprise space, while Aerohive generates a significant portion of its business from the educational market.

Meyercord also singled out Aerohive’s cloud management platform as benefitting Extreme’s on-premises focus. He noted that while Extreme has built its own cloud management platform, Aerohive “has the latest third-generation cloud platform that we will be able to leverage.”

Extreme will also continue to invest in that Aerohive business. “We want to make sure we nurture that cloud native business,” Meyercord said.

Aerohive carved out a business in providing cloud management and controller-less WiFi access points. A recent IHS Markit report ranked the company as the second leading provider of cloud managed wireless LAN services behind market heavyweight Cisco.

Aerohive also has an SD-WAN product targeted at mid-enterprise customers.

The company reported $33 million in revenues for its most recent fiscal quarter. That was down nearly 8% from the previous year. Net losses also took a turn for the worse, increasing from a loss of $7.3 million during its first fiscal quarter of 2018, to a loss of $8.7 million this year.

Connected with those results, Aerohive CEO David Flynn said the company missed expectations due to domestic sales issues and a shift in sales to lower-priced equipment and subscription tiers. He did note that the company was taking “actions to improve execution and predictability going forward.”

Bob Laliberte, practice leader and senior analyst at Enterprise Strategy Group, noted in a blog post that the deal provides Extreme with a "number of key elements to help it continue to grow." He cited the cloud management capabilities as a "big one," as well as the ability to cross sell into larger organizations, and tapping into Aerohive's SD-WAN capabilities to better compete in the SD-Branch market.

"The acquisition of Aerohive provides a number of synergies ... and provides Extreme with another opportunity to scale the business," he wrote.

Tam Dell'Oro, CEO of the Dell'Oro Group, noted the deal plays into broader growth expected from the enterprise and campus networking markets. She cited Arista’s recent launch of its campus Ethernet switches and new WiFi 6 access points, Cisco’s launch of its Catalyst 9K switches and WiFi products, and Juniper’s acquisition of cloud managed WiFi company Mist Systems for $405 million.

"The campus network market is embarking on the most significant refresh cycle in over a decade and there is a lot of movement among the manufacturers as they position themselves to best capture opportunity," Dell'Oro wrote in an analysis of the deal.

The Aerohive deal also builds on Extreme’s past high-profile acquisitions, including Avaya’s networking business, Brocade’s data center networking assets, and Zebra Technology.

Meyercord noted that the company has been focused on growing its portfolio by targeting the enterprise market. That growth helped the company generate $251 million in revenues for its most recent fiscal quarter, however, like Aerohive that result was down slightly year over year.

The exec did recently tell investors that security concerns tied to products from China-based vendor Huawei could boost his company’s data center business.

“Our story and our product portfolio are resonating well with European customers,” Meyercord said on the company’s fiscal second quarter 2019 earnings call. “European governments are also placing greater scrutiny on the security concerns around Huawei products, which is creating an opportunity for us in the marketplace,” he added, according to a Seeking Alpha transcript.

Extreme management said it was still working on the exact financial impact from the Aerohive deal, but that it does expect it to be accretive to earnings starting in fiscal year 2020.