Extreme measures

Extreme Networks quietly adds Optranet to its portfolio Broadband networking solutions provider Extreme Networks has added privately held broadband IP services provider Optranet to its arsenal of Ethernet-based services.

Extreme plans to exchange 2 million shares of its common stock for all outstanding shares of Optranet when the transaction closes on Jan. 31. However, Santa Clara, Calif.-based Extreme would not say how Optranet fits into its plans.

"We were obliged to disclose the generic terms of the deal for investors [on Jan. 2], but we remain in the quiet period prior to earnings," said an Extreme spokesman.

Optranet co-founder and Marketing Vice President Craig Stouffer, meanwhile, deferred all questions about the acquisition to Extreme.

Extreme's stock took a dive the day the acquisition was announced, dropping $11.50 - a 29% loss - to $27.63, though the price rebounded to $40.56 last week. Shares had reached a 52-week high of $128.88 in mid-October. Market analysts suggested the stock plummet was more likely part of an overall market condition and not directly related to the acquisition.

Optranet, a privately held start-up based in Pleasanton, Calif., is developing last-mile broadband delivery technology aimed at the multi-tenant unit (MTU) market. Extreme builds computer-network switches that take Ethernet capabilities into metropolitan area networks.

The combination got the stamp of approval from Erik Suppiger, senior analyst of network and communications for investment firm Chase H&Q. "The acquisition is going to bring some technology to Extreme that will enable them to compete in the multi-tenant, multi-dwelling unit market," Suppiger said.

Optranet was started last January by senior executives from Redback Networks, 3Com and Tut Systems, the company said. It received a $6.7 million first round investment led by Norwest Venture Partners and private investors in March.

The company conducted private demonstrations of its networking equipment at the Broadband MTU 2000 conference in Las Vegas in October and predicted it would enter initial trials with service providers during the first quarter of this year.

For Extreme, the price was right, Suppiger added. "I don't think Optranet had any revenues, so it's hard to argue that they were a very sizable player as of yet," he said. "I think they were developing products. For the most part, they were a technology acquisition."

And the 2 million shares of stock were not an Extreme burden, he added. "[Extreme] has over 100 million shares outstanding. I don't think it's going to be particularly significant," he said.

Extreme had been working with Optranet for a long time, Suppiger said. "Extreme has had a policy of investing in start-up business and Optranet was one of the areas where they were looking."

Optranet, which has not yet publicly announced its product line, is targeting the $4 billion worldwide MTU market with technology that "enables service providers to deliver a whole new class of IP-based differentiated services to their business customers," according to the company's Web site.

January 2000: Founded

March 2000: $6.7 million first round funding led by Norwest Venture Partners and private investors

September 2000: First product demonstration

January 2001: Acquired by Extreme Networks Executive Team

Darrell Scherbarth, founder, CEO and president

Craig Stouffer, co-founder and marketing vice president

Chris Thomson, co-founder and chief architect