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.
​

Extreme Networks announced plans to acquire Aerohive, which has most of its revenues in Enterprise WLAN.  The deal was a surprise, as evidenced by the 40% price premium paid on on HIVE.  After this deal closes, Extreme's WLAN business will be the combination of three WLAN businesses - the traditional WLAN business from Enterasys (Ottawa based team), the Motorola Wireless WLAN business (acquired by Zebra, then sold to Extreme) and Aerohive.  Each of these three businesses had strengths, for instance, the Ottawa team had designed a product line that had high performance in crowded venues - Extreme has enjoyed a long relationship with the NFV; the Motorola team had designed systems that were effective in retail and logistics (as a consequence of Motorola's ownership of Symbol Tech, a bar code scanner company); and Aerohive, which was as of 1Q19 the #2 revenue player in cloud-managed WLAN services and with a strong presence in the US K-12 vertical.  While there is certainly some risk that Extreme does not integrate the Aerohive business effectively, there are some interesting aspects to this deal.
#1: Aerohive's cloud-managed WLAN services is a significant player in the market.  We expect many small and medium businesses will adopt cloud-managed WLAN, and Extreme had a less mature offering here.  We see this as the primary benefit of the Aerohive acquisition.
#2: Aerohive's vertical market exposure in US K-12 (education) market and the managed care part of the health care industry are a nice addition to Extreme.  These markets are additive.
#3: Aerohive had a SD-WAN product that while not a big revenue generator will be important for Extreme in selling to small and medium sized businesses.  We expect the SMEs and branch offices will be upgrading using a SD-Branch approach, where upgrades to WLAN, switching and SD-WAN will be done at once.  Extreme had a hole here and Aerohive fills it.
#4: Aerohive had a new product, A3, which we categorized as Enhanced Network Access Control.  The front end of this product is very modern.  Extreme also had its own NAC product.  Our hunch is the company will merge the two, taking the best of both.  We see larger enterprises as demanding this type of support.  HPE Aruba sells its Clearpass product in a wireless+wired+ENAC bundle to larger sized business, just as Cisco sells its ISE and wireless+wired bundle.  
#5: Aerohive has 802.11ax products.  We expect that increasingly, as customers adopt 802.11ax, with its expected throughput under high loads exceeding 1 Gb/sec, this will drive an upgrade cycle to switches with MultiGigabit support.  Extreme cited "cross selling" in its announcement of this deal, and we agree that customers in the 802.11ax world will be increasingly buying new switches when they adopt new wireless.

This deal was a surprise because Extreme already has WLAN in its portfolio, but if Extreme executes on this business transaction effectively, it can solidify its position in the mid-market by offering cloud services and SD-WAN (through a SD-Branch bundle) and potentially move both up market (with ENAC) and if it choses, downmarket by maintaining a business practice that Aerohive rolled out well over a year ago that can be described as a "freemium" model for its cloud-managed WLAN services.