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On August 8, 2019, publicly-traded Cambium announced that it had completed the acquisition of the Xirrus products and cloud services from privately-held Riverbed Technology, Inc. Xirrus has been a vendor in the Enterprise WLAN market for a while now and has been associated with its high-performance enterprise-class WLAN products as well as its cloud-managed services. In our research, we find Xirrus has done well in the large venues, the education, government, and retail markets.
We interviewed the team at Cambium today and learned that the company is committed to using channels as a distribution strategy for the combined portfolio. Additionally, the team told us it will be supporting both Cambium WLAN customers as well as Xirrus customers, and that, over time, the products and services will be converged. We think it makes sense to rationalize the products, which will allow future customers to take advantage of developments made at each of the organizations. The team explained that Cambium will be focusing primarily on medium and small-sized customers and that it will not be pursuing large enterprises associated with the Fortune 1000, instance. The timing of Cambium’s acquisition makes sense on several counts. First, it just completed its Initial Public Offering and is more well-capitalized than when it was a privately-held company. Second, during its IPO, Cambium identified that it expects its exposure to the enterprise market is key to its growth, so getting more exposure here will increase it further. Third, several other companies have acquired enterprise WLAN vendors, and Cambium is part of this greater trend. For instance, Arista Networks completed its acquisition of Mojo Networks in late 2018 and Juniper Networks closed its acquisition of Mist Systems at the end of 1Q19.
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The OCP Summit 2018 hit record attendance and we can can summarize the theme as that of continued disaggregation of network/server functions. Examples of demonstrations, presentations and proposals associated with disaggregation are as follows:
SD-WAN vendor Riverbed announced plans to acquire Wireless LAN vendor Xirrus today. Riverbed emphasizes its product line and portfolio strategy in the Software Defined Wide Area Network (SD-WAN) market. Xirrus has emphasized its product portfolio as being a cloud-enabled Wireless LAN (WLAN) market vendor. Two main themes come to mind with this acquisition:
As background, it is quite interesting to see the journey both Riverbed and Xirrus have followed over the years that makes this deal work. Both today are active participants in the cloud and software defined markets. Both Riverbed and Xirrus have participated successfully in their respective marketplaces to have undergone transformations as their markets have evolved.
Our view is that SD-WAN is more than WAN optimization. It is more than just security and services. And it is more than branch routers. SD-WAN is a full branch play. Every vendor will approach SD-WAN differently depending on their strengths. With the Xirrus acquisition, Riverbed just differentiated from its SD-WAN competitors by doubling down on enterprise relationships. We are excited about the SD-WAN opportunity. Many vendors are repositioning their product lines to address SD-WAN, and Riverbed is both strengthening and differentiating its product line to more fully address enterprise needs by adding LAN and WLAN capabilities to its portfolio. WLAN industry consolidation has been a major theme in the past several years. Most recently, we've seen:
Consider that the early consolidation deals for WLAN companies were mainly to allow Ethernet Campus switch companies to sell WLAN/Campus Switch products to their customers. HPE's May 2015 acquisition of Aruba was a good example of this kind of acquisition. And the acquisition was done in large part to respond to Cisco's acquisition of Meraki a couple years before the HPE/Aruba deal. And, in a corporate M&A twist-of-fate, in mid 2016, switch vendor Brocade announced plans to acquire WLAN vendor Ruckus. But, before it could complete the deal, semiconductor vendor Broadcom announced its own plans to acquire Brocade and spin off all Brocade assets but its Fibre Channel assets, putting in motion the Arris for Ruckus and Brocade ICX switch products deal. So, the first several deals were switch/WLAN related, and like we said, more recently, WLAN acquisitions are related to broader themes than just campus switch consolidation of WLAN, including broadband equipment vendor Arris for Ruckus and SD-WAN company Riverbed for Xirrus. This leaves very few pureplay Enterprise-class WLAN vendors in the marketplace these days, Aerohive being the largest among the pureplays. Interesting indeed. Aerohive, a leading enterprise-class WLAN vendor, announced changes to its product and services pricing that is intended to get its foot in the door of more customers. Here is what it has done:
In our interview with management about the new product (AP122) and new service (Connect) announcement, we learned that the company expects many of its prospective customers will opt to chose the "Select" service level over time because there are more features than those available from Connect. Additionally, we learned that the company will be charging somewhat more for its services and software and somewhat less for its hardware, taken as a measure across its entire product line. We see this change as being consistent with its price-aggressiveness it just announced for its low end" of its product line, namely the AP122 and AP 130. We expect that Aerohive's pricing moves will have an impact on the industry. Certainly, other well-featured products with aggressive price points have done well in the marketplace in recent years. |
CHRIS DePUY
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