Lenovo Partners With Extreme -- and Maybe Should Just Buy Them

Lenovo and Extreme Networks are announcing a partnership today, but given the ambitions behind the deal, you have to wonder if they might as well join forces in an acquisition.

Extreme is making two announcements today aimed at bringing converged infrastructure -- prefab combinations of computing, storage, and networking -- to data center customers. It's announcing a reseller deal with Lenovo and the news that its gear has been certified for EMC Corp.'s Vspex converged offering.

Both deals could help boost Extreme's miniscule market share, but the Lenovo deal has some particularly tantalizing potential to it.

Lenovo is best known for laptops, but it wants to broaden all the way up into the data center. Doing that is probably going to require a converged offering.

Customers are interested in buying these pieces "in unison" for the sake of interoperability: Getting everything in one box (one pre-assembled rack, anyway) settles those concerns, says Jake Howering, Extreme's director of marketing for the data-center market. "You can't make those decisions in isolation. It's really an infrastructure decision. It's different from 10 years ago."

"Even though this market talks about open standards, everybody's moving to a stack -- Cisco, EMC with VSpex, Dell, HP. If you don't have a stack or aren't part of somebody's, you can't compete," says Zeus Kerravala, principal analyst with ZK Research.

Why Lenovo Might Want More Networking

Lenovo can get the networking piece by reselling Extreme, but why not go a step further and acquire the company?

"I do think that would be a great move for Lenovo," Kerravala says, because for this data center strategy to work, Lenovo needs a deep commitment to networking.

"It's a little like a golf swing: You've got to commit, or you won't make the shot," he says. "If they're trying to get into the data center without a stack offering, it's going to be difficult for them to succeed."

Extreme would also come cheap, by Lenovo's standards. Extreme's market capitalization was $333 million as of July 16, and its balance sheet includes about $120 million in cash.

It would make a suitable exit for Extreme, Kerravala thinks. "Their market share does not reflect their quality of product. Part of it, again, is that if you look at the industry, they're the only pure play left," Kerravala says. Everyone else has a stack.

There's no indication so far that either company is interested in merging. Their partnership goes beyond a plain reseller agreement, though; they'll be working on R&D together as well. Lenovo's U.S. headquarters is in Research Triangle Park, N.C., and Extreme just opened a facility there.

EMC, That Other Data Center Partner

In the meantime, Extreme has another entry into that converged infrastructure world by being part of EMC's VSpex.

Unlike VCE's Vblocks and Cisco's Unified Computing System (UCS), VSpex offers choices of vendors at every stage. (Well, not when it comes to storage.) Specifically, it's got Cisco and Brocade qualified as networking options.

Those two names cover quite a bit of the channel, but Extreme can still expand VSpex's reach. "We do have channel partners that resell our product and don't sell Cisco or Brocade," Howering says.

Finally, just to tangle things up, note that Lenovo and EMC already became partners about a year ago -- but that deal was more about medium-sized businesses rather than data centers.