Extreme Networks Buying Infovista SD-WAN Unit; Could Dell Follow?

Extreme Networks is moving toward a cloud-driven future with the $73 million purchase of Infovista‘s SD-WAN division.

Infovista is moving on from the Ipanema SD-WAN unit it bought in 2015. Ipanema has declined in SD-WAN market share and customers in recent years; on the other hand, Extreme is adding cloud-managed SD-WAN connectivity and security features to its portfolio.

“By acquiring Ipanema, Extreme extends its market leadership position in cloud with features that will help to reduce complexity for customers when it comes to operating and managing their increasingly distributed networks,” Extreme president and CEO Ed Meyercord said. “Tapping into the fast-growing and developing market segments of cloud-managed SD-WAN, and, in the future, SASE, accelerates our topline growth potential and expands our opportunity to grow recurring revenue with additional SaaS applications.”

Extreme Networks’ Ed Meyercord

Extreme is technically buying newly spun-off company called Ipanematech SAS, which private equity firms Apax Partners (majority stake) and Thoma Bravo (minority stake) own. The deal will close in October.

The news comes almost a year after Extreme rival Juniper Networks purchased SD-WAN provider 128 Technology. SD-WAN consolidation caught fire in 2020, as Palo Alto Networks bought CloudGenix, HPE bought Silver Peak, and Adaptiv Networks bought Elfiq Networks.

Extreme and SD-WAN

Extreme has toyed with SD-WAN before.

The company in 2019 bought Aerohive Networks for $272 million. Aerohive specializes in cloud-managed Wi-Fi and network management, but it also came with an SD-WAN solution. Meyercord told investors on an earnings call last month that it expanded its SD-WAN offering to include its AP302W wireless access point.

However, Zeus Kerravala, founder and principal analyst at ZK Research, said Extreme bought Aerohive for its cloud management capabilities, not SD-WAN.

ZK Research’s Zeus Kerravala

“They had an SD-WAN offering, but it wasn’t very good, and Extreme hasn’t really put any investment into the edge products that were there,” Kerravala told Channel Futures.

A Good Fit

However, Kerravala said Extreme had been looking like a SD-WAN solution like Ipanema for a long time. Specifically, the company was looking for a cloud-native solution. The pandemic increased demand for SD-WAN and SASE delivered through the cloud, rather than through offices. That’s what Extreme executives are talking about when they mention the “infinite enterprise.”

“It’s the ability to deliver security and network services anywhere you have a corporate entity. And they really couldn’t address that outside of the corporate locations,” Kerravala said.

Meyercord on the same earnings call stressed that “cloud-enabled networking” is growing faster than any other part of the networking industry.

“What we’re seeing is now the reimagining of the workplace or the work environment where enterprise customers are thinking about more of a flexible work environment — a hybrid work environment,” Meyercord told investors. “And this is why you hear us talk about the distributed enterprise or the infinite enterprise, because what it means is that the enterprises are taking responsibility for the new edge of the network. And the new edge of the network is going to be that individual.”

It’s worth noting that Infovista in June announced strategic partnerships with Check Point and Equinix that will make Ipanema a “fully cloud-native” platform.

Kerravala said the latest cloud partnerships helped make Ipanema stand out among rival solutions. But on the other hand, he expressed surprise that Infovista chose now to make the sale.

“It’s a little shocking they sold it, frankly; especially because it wasn’t a huge purchase price,” he said.

However, Infovista had made little headway in the SD-WAN market. In fact, the company slid downward both in revenue and market share in IHS Markit’s quarterly report from Q4 2017 to Q1 2019. Extreme said in its news release that 400 customers are using Ipanema. That number comes after six years in the Infovista family. Moreover, 700 customers were using Ipanema Technologies’ platform when Infovista acquired it in 2015.

Infovista’s Play

Kerravala said Infovista is refocusing on what it does best.

“But I do think Infovista realized it is more of a telco service assurance company,” he said. “The SD-WAN and SASE was kind of like an oval peg in a round hole. It was kind of the same, but not really. This lets them focus more on what their core market is.”

Kerravala said that although Infovista may no longer see its SD-WAN platform as valuable, that does not mean it …… is selling a bad platform.

Matthew Toth, president of C3 Technology advisors, agreed that the sale says more about Infovista’s go-to-market strategy.

Matthew Toth

“When organizations find that they have a good or great product with a lackluster distribution method, they sell out,” Toth said. “Silver Peak, CloudGenix, and others have gone down this road. They simply get bought by companies with a gap in that tech space, and much better distribution channels than the acquiree.”

In fact, Kerravala said Extreme is landing a good deal. He estimates that Ipanema was worth about $20 million in annual revenue, making the purchasing price about three times larger. Compare that to HPE’s $925 million acquisition of Silver Peak, which Kerravala estimates as seven times Silver Peak’s annual revenue.

“What [Extreme] looks for [are] distressed assets within companies where they don���t really fit. They bought the networking business from Avaya and the Wi-Fi business from Zebra,” Kerravala said. “They’re able to get really good deals on this, because the business looks poor, but it actually is good technology.”

SD-WAN acquisition price tags have ranged from the paltry $800,000 Adaptiv spent to buy Elfiq, to HPE’s $925 million Silver Peak splurge. Cisco paid $610 million for Viptela, VMware paid $449 million for VeloCloud, and Juniper paid $450 million for 128 Technology.

European Presence

As a result of the acquisition, Extreme gained a second “technology center of excellence” in Europe. Ipanema has an office in France.

“We’ll extend our go-to-market and R&D footprint in Europe, where Ipanema is an established player,” Meyercord said.

Moreover, Kerravala pointed to the relationships Ipanema holds with European service providers — namely Orange Business Services and BT.

“Extreme doesn’t have a very large European presence,” Kerravala said. “All of a sudden this gets them a couple of big partners there.”

Who’s Next?

Extreme and Infovista leave behind a mix of potential buyers and sellers in the SD-WAN market. Which companies will those be?

First, we might more wisely ask which pure-play SD-WAN provider won’t sell. Kerravala is betting on Versa Networks to stay the course, leveraging its many strong service provider relationships. Kerravala said either Cato Networks or Aryaka Networks, which both offer their own global private backbone, could stand pat. That could depend on which goes public first.

Some vendors might overestimate their value as a standalone company and suffer the consequences.

“You could wind up with a lot of companies that stick around and don’t get sold even though they get an offer, because they think they’re going to be the next big thing. Then they end up doing a fire sale at the end,” Kerravala said.

Kerravala pointed to FatPipe Networks and Mushroom Networks as smaller companies that will likely see consolidation or go under.

The potential suitors vary considerably. Kerravala pointed to Dell’s conspicuous lack of an SD-WAN product. He noted that customers often buy SD-WAN and unified communications together and suggested that a company like Vonage might perhaps take a bite on SD-WAN. In addition, he said Arista Network might also step into the market.

SD-WAN consolidation started in earnest when Cisco acquired Viptela for $610 million in 2017. Then VMware bought VeloCloud in late 2017 for $449 million. Oracle stirred the pot in 2018 by purchasing Talari Networks.

You can also check out Light Reading’s Kelsey Kusterer Siser’s excellent analysis of the deal.