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Network Engines Buys Alliance Systems for $40M

A company that made $96 million in 2006 by OEMing server appliances to EMC is on the boil again.

Network Engines, which ceased selling HBAs for storage suppliers in 2004 in order to pursue life as a storage and security appliance OEM, has shelled out $40 million in cash and stock to buy Alliance Systems, a profitable Texas-based maker of server appliances, also for OEMs.

The deal has been approved by the board of publicly held Network Engines and by shareholders of privately held Alliance, whose revenues in 2006 were $102 million. The sale is expected to close within a week, comprising $35 million in cash and nearly $5 million in stock.

After the close, Network Engines will retain its company name, but add about $100 million to quarter revenues from Alliance (immediately accretive to Network Engines on a non-GAAP basis) and about 130 employees in Plano, Texas. Network Engines already has 150 employees in Canton, Mass.

The Alliance executive team will be folded into Network Engines under the leadership of Network Engines' current CEO, Greg Shortell, who was appointed in January 2006.

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