Extreme Networks Ramps on Cloud, Targets 5G

Extreme Networks is a changed company, not just financially, but from a product standpoint, CEO Ed Meyercord claims. The company this week put COVID-19-related fiscal challenges behind it, posting its strongest quarter in more than a year, punctuated by 21% year-over-year revenue growth of $253 million.

“Last year we were affected, I would say, across the board,” Meyercord said of the COVID-19 pandemic. “There were a lot of people that just weren’t exactly sure what to do and what was going to happen with COVID,”

In some cases multi-million dollar orders were postponed seemingly indefinitely, he explained. But now with the pandemic ebbing, business is picking up again.

“21% year-over-year growth in revenue is big. It’s big for us,” he said, adding “we see double-digit growth extending beyond the COVID-compare quarters, and we see double-digit growth extending beyond the end of this fiscal year.”

Extreme anticipates that “stronger than normal” enterprise growth will drive revenues in the coming quarters. “This has to do with enterprises spending on networking rather than on Chromebooks, laptops, peripherals to support remote learning, and now infrastructure to support higher quality connections,” Meyercord said.

Extreme’s Transformation All About Cloud

Despite the pandemic weighing heavily on earnings, Extreme spent much of the 2020 calendar year revamping its product portfolio around cloud management.

This pivot was made possible by the integration of technologies acquired from Aerohive Networks for $272 million in 2019. The acquisition not only netted the company a wide portfolio of wireless, switching, and SD-WAN hardware and software, not to mention a significant number of customers in the education market but more importantly formed the basis of the company’s cloud management offering.

“The real game changer for us was the Aerohive acquisition, when we acquired the industry leading cloud,” Meyercord said. “And now, we’ve completely embraced it as an organization. We’ve moved to migrate all of our hardware platforms into the cloud.”

From the Aerohive Hive Manager, Extreme built ExtremeCloud IQ, a subscription-based cloud management and hardware controller, which replaces traditional on-premises offerings.

Since then, the company has moved aggressively to tie together its hardware and software portfolio under the cloud platform. Extreme introduced new access points and switches developed specifically for use with the platform and began rolling out a spate of value-added features and simplified licensing.

The company has also made data retention and analysis a key selling point. Early in the shift to cloud management, Extreme dropped data-retention limits for network telemetry, allowing customers can now apply machine learning-based network analysis over historically significant periods.

And in the latest update, Extreme has begun opening ExtremeCloud IQ to third-party vendors in a bid to ease the deployment of Extreme products in brownfield environments.

“Our vision is we want to attach as many devices to our cloud as we can,” whether they’re from Extreme or not, Meyercord said, in an earlier interview.

And the move to cloud is paying dividends, Meyercord said.

“We have been turning up and migrating customers, who are on other technologies, onto our cloud platform,” he said, adding that Extreme now has growth opportunities migrating customers using on-premises network management platforms. “We didn’t have the capability to do this a year ago.”

Semiconductor Headwinds

While Extreme has, for the most part, shaken off the financial side-effects of the pandemic, a new challenge lurks on the horizon: a global semiconductor shortage.

“We’re feeling it like everybody else,” Meyercord said. “We started to see product constraints creep up in our Q2, creep up more in this quarter.”

And Extreme expects these product constraints to get worse in the coming quarters. To mitigate this, the company is working to expand its inventory of critical semiconductors.

“We see the greatest constraint happening in the quarter that we’re in right now in June, and based on orders that have been committed from our supply chain, we see an easing of that going forward,” Meyercord said. “We do expect constraints to continue for another nine or 12 months, but our teams have gotten very aggressive at managing, and we’re ordering buffer stocks.”

Meyercord said that he expects the impacts of the shortage on Extreme to subside by the end of 2022.

Extreme Has 5G Aspirations

Beyond traditional campus and enterprise networking gear, Extreme has aspirations to deliver cloud-native services at the edge for 5G carrier deployments, via a full-stack NFVi platform built in collaboration with two yet-to-be-named service providers and telecom partners.

“It’s infinitely scalable, and it’s more flexible, and so it provides us the ability to turn up and break down, services and software delivery faster than older technologies,” Meyercord said. “As 5G gets deployed, I think we’re going to be in a strong position because of this cloud-native edge compute capability.”

Meyercord expects to see the company’s 5G edge platform begin ramping in the second half of the 2021 calendar year.