Broadcom to Sell Brocade's Data Center Networking Business to Extreme Networks

Broadcom (AVGO)  and Extreme Networks (EXTR) jointly announced on Wednesday that the two have entered into an agreement in which Extreme will acquire Brocade Communications Systems' data center switching, routing, and analytics business from Broadcom.

Brocade's data center networking business will be sold to Extreme for $55 million in cash, consisting of $35 million at closing and $20 million in deferred payments, as well as the potential for performance-based payments to Broadcom, to be paid over a five-year term.

The deal sent shares of San Jose, Calif.-based Extreme up about 17% after hours to $7.55 per share. Extreme had a market cap of about $703 million as of Wednesday's close.

The deal comes as Broadcom's $5.5 billion, November 2016 purchase of fellow semiconductor company Brocade is undergoing an extended antitrust investigation by the Federal Trade Commission. Broadcom announced the FTC's second request for information on the deal in a securities filing earlier this year. Broadcom said that it still expects the merger to close in the second half of fiscal 2017, which ends Oct. 28.

That divestiture announced Wednesday is not being made to address antitrust concerns the FTC might raise. Broadcom is simply shedding a unit that competes with many of Broadcom's OEM customers like Arista   (ANET) , Cisco (CSCO)  and Juniper (JNPR)  . Yet there's debate as to whether other divestitures will be required of Broadcom to gain regulatory approval of the deal.

Broadcom shares were up less than a percent after hours to $221.99.

Editor's note: This article was originally published at 5:13 pm ET and has been updated with afterhours prices.

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