Enterasys is sold to Calif. firm in $180m deal

CEO: The deal would be ‘transformational for the industry’

Enterasys Networks, the Salem-based Ethernet switching company, announced Thursday morning that it has been sold to Extreme Networks, a publicly owned California competitor, for $180 million in cash.

The deal is expected to close at the end of the year, with or without financing.

The two companies combined have nearly $630 million in annual revenues. The deal would create the largest firm exclusively devoted to Ethernet switching, and will be “transformational to the industry,” said Chuck Berger, president and CEO of Extreme, in a conference call about the merger. Berger estimated that it would result in 12,000 customers, which would make it about fourth largest in the network market. Cisco Systems has the lead by far, but the tech giant does other things besides switching.

The two companies’ strengths will be complementary, Berger said, but the deal for Enterasys – a privately held company that employs 1,000 people and had $325 million in revenues in the last fiscal year – will result in some “significant synergies” that could save about $30 to $40 million at the end of the year.

The savings should be apparent, immediately adding 3 to 6 cents a share to the company in the first full quarter after the deal closes.

Extreme will keep on Chris Crowell, president and CEO of Enterasys, in an executive capacity, Berger said, as well as the “best each company” has in terms of talent. He emphasized that product lines of both lines would still be continued.

Berger noted that Enterasys has made big headway in the Wi-Fi network, recently earning a contract with the Philadelphia Eagles, on top of currently serving the New England Patriots. And that is particularly import in this “BYOD (Bring Your Own Device) World,” said Berger.

Enterasys was formed in 2001 as a spinoff from Cabletron Systems, once New Hampshire’s largest employer, but it soon became engulfed in an accounting scandal that resulted in nine executives being sent to jail, including the CEO and chief financial officer.

The company, which moved to Massachusetts in 2003,  was sold to a private equity firm in 2006 for $386 million, but it moved back to the Granite State earlier this year, bringing about 600 jobs to Salem. The company also has facilities in Canada, Mexico and around the globe.

Extreme Networks, traded on the Nasdaq exchange under the ticker EXTR, is located in San Jose, Calif. It has 750 employees.