10-Gig Drives Extreme Revenues

Extreme Networks Inc. (Nasdaq: EXTR) reported its second-quarter results last night, posting net revenues of $100.3 million, up 20 percent on the same quarter last year, and topping analyst estimates of $98.4 million (see Extreme Reports Q2).

Earnings per share were 8 cents, up from a net loss of 5 cents in the same quarter last year. This also came in above analyst estimates of 4 cents.

Extremes CEO Gordon Stitt, speaking on a conference call, explained that clamor for 10-Gigabit Ethernet helped drive sales, particularly for the company’s Black Diamond and Summit products. “We saw 10-Gigabit Ethernet demand grow 50 percent over the last quarter,” he said.

According to Stitt, this proves that Extreme’s network message is getting through. ”It is driven by our two-tier architecture and using 10-Gigabit Ethernet links to tie the core to the access layer."

Stitt kept returning to this two-tier mantra throughout the call. Rather than the traditional three-tier network, Extreme is touting an approach that consists of an intelligent core and an access layer. The company maintains that this reduces the number of devices used, resulting in a lower cost of ownership.The exec also gave an insight into who is buying Extreme’s recently launched Aspen switch, which is targeted at the access layer of large enterprise networks as well as high-performance computing clusters (see Extreme Readies for VOIP).

Although Extreme only started shipping the boxes in December, Stitt said that existing customer Welch’s (the grape people) is using the device, along with Agere Systems Inc. (NYSE: AGR.A) and Hawaiian Air, which has deployed the switch to support its reservation system.

Japan has been difficult, though. “Our business there is more than 50 percent carriers, and the carrier business has been lumpy. They continue to buy, but at unpredictable times.”

In an effort to combat the situation, the company is opening additional sales offices in Japan, as well as targeting Japanese enterprise customers.

On the subject of Extreme’s ongoing relationship with Avaya Inc. (NYSE: AV), Stitt promised joint products in the near future. “We will see some products in the first half of this year -- they will largely be software products."One topic that did not come up during the call was M&A. Extreme, along with Foundry Networks Inc. (Nasdaq: FDRY), was recently touted as a possible target of Juniper Networks Inc. (Nasdaq: JNPR) in its search for an Ethernet player (see Juniper's Extreme Thoughts Are Back and Juniper Spikes M&A Rumors).

— James Rogers, Site Editor, Next-Gen Data Center Forum