As networking equipment market consolidates, network switching vendor Extreme Networks will work with WLAN leader Motorola to develop converged network devices. SMBs need to watch carefully when making buying decisions.
In a networking equipment market poised to undergo a dramatic transformation, two niche suppliers have decided to team up. Extreme Networks, which makes sophisticated network switches, has decided to work with Motorola, a leading supplier of wireless LAN products, to develop converged network devices.
The network equipment market has been undergoing significant changes recently. Traditionally, these products were sold autonomously, but increasingly they are being bundled in various ways. With companies of all sizes increasingly reliant on mobile systems, the need for network switches that can consolidate wired and wireless connections has become clear. While converged network devices have sparked a great deal of interest and conversation, they have been hampered by a lack of interoperability among different products. The new alliance is geared to overcoming that issue.
In the short term, Extreme Networks will begin reselling Motorola's network equipment. New products will begin to arrive later this year and hit full force in the first quarter of 2010.
By the end of the year, Extreme plans to deliver an IEEE 802.11a/b/g access point starting at $695 and an 802.11a/b/g outdoor access point starting at $2,295. An 802.11a/b/g/n access point is slated for delivery in the first quarter of next year. Extreme will ship two Motorola-based WLAN controllers in December and a third early in 2010. A suite of management tools for those devices, also coming in December, will cost $4,995.
Longer term, the two vendors will work together to develop integrated wired and wireless devices, so small and medium businesses can reduce the number of products on their network. Management tools that can control both types of devices from a central console are also on the docket.
Good For Extreme?
The agreement could potentially help both vendors. Historically, Extreme has done a good job delivering sophisticated network switches, which often come with a high price tag. Recently, however, the company has been getting squeezed. It's last quarter's revenue was less than anticipated, with the vendor explaining that some anticipated sales had taken longer than expected to close.
Such claims ring hollow because competitors have done well in the same period. More likely, customers are beginning to view Ethernet switches as commodities and may no longer be willing to pay a premium for Extreme's sophisticated features. The integrated wired/wireless switches may provide Extreme with a more appealing differentiator, one users may be willing to pay extra for.
In addition, Extreme had a reselling agreement with Chantry Networks, which was acquired by Siemens Communications, for wireless devices. While Extreme will continue to offer those products to existing customers, Motorola is now its long-term OEM (original equipment manufacturing) partner.
What It Means For Motorola
Motorola, meanwhile, has been a key player in the WLAN market but hasn't had much of a story to tell in regards to wired devices. With the Extreme deal, Motorola now has access to a suite of high-performance devices.
While the vendor historically has concentrated on niche markets, such as warehousing and retail, it recently has begun moving more into the OEM market. The supplier signed an agreement with Brocade, which makes data switching products. Motorola claims that it is not trying to become mainly an OEM supplier, but it did ink two agreements in a short timeframe. What is driving its desire to work with other suppliers?
Consolidation Looms
Consolidation has become the market's watchword as vendors team up to provide themselves with needed bulk. With the market maturing and product prices falling, larger volume has become necessary, so vendors can remain viable long term. OEM relationships are one way to broaden a company's sales reach.
Acquisitions are another. In fact, Brocade has been shopping itself around to potential bidders. Perhaps, the Extreme deal is a way for Motorola to hedge its bets in case Brocade winds up in the arms of one of its competitors. Maybe not?
The network industry is undergoing dramatic changes. More partnerships and acquisitions seem likely to unfold in the coming months. Small and midsize businesses need to be aware of how these changes may impact their prime suppliers and then plan their purchases accordingly.
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See more columns by Paul Korzeniowski.
Paul Korzeniowski is a Sudbury, Mass.-based freelance writer who has been writing about networking issues for two decades. His work has appeared in Business 2.0, Entrepreneur, Investor's Business Daily, Newsweek, and InformationWeek.
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