When Ed Meyercord took over as president and CEO of Extreme Networks last year, he inherited a company with its share of challenges.
The networking vendor two weeks earlier had once again missed its projected quarterly financial numbers; revenue had declined 16 percent year over year; Extreme lost $23.5 million; and it was seeing weakness in key markets such as higher education and venues. It also was feeling pressure from rivals Cisco Systems and Juniper Networks, and was struggling to complete the integration of Enterasys Networks, a wired and wireless networking company Extreme acquired the year before for $180 million.
However, the underpinnings of the company were solid, Meyercord (left in photo) said in a recent interview with eWEEK. Extreme had solid technology products, talented engineers, a good customer base in a midmarket and campus networking space that was being underserved by larger competitors, and—with the acquisition of Enterasys—a head start on most other vendors in the convergence of wired and wireless networks.
More than anything, what the company needed to do was improve its focus, a word that Meyercord and Norman Rice, (right in photo) executive vice president of Marketing and Corporate Development, kept coming back to during a recent interview outside of Boston. And focus was a foundation of the corporate strategy Meyercord put in place weeks after taking over the top position after coming over from Extreme’s board of directors, where he spent several years.
Under his direction, Extreme Networks changed its focus to selling solutions rather than point products. The company focused on selling its wireless capabilities as well as its wired expertise, on the midmarket and campus networking spaces, on five key verticals and one bolstering and expanding its channel partners. The company focused on building a solid brand, developing an effective go-to-market strategy and better defining itself for its employees, partners and customers.
“I’m not sure Extreme knew where it fit” in the market a year ago, Meyercord said. “Today, we know exactly where we fit.”
The refocused efforts also came with a restructuring process that included a remaking of the executive team—most recently, Steve Harrington rejoined the ranks as vice president of Marketing after almost two years away from the company—and a painful 18 percent workforce reduction of about 285 jobs, with the goal of saving $40 million in operational costs.
The efforts appear to be working. In the most recent financial quarter, revenue grew 4 percent from the same period last year and operating income hit $5.4 million, compared with the $5.6 million loss a year earlier. Gross margins are up, debt is down 20 percent and cash is up 20 percent, the CEO said. Anecdotally, enthusiasm is high in Extreme’s offices, he said.
What’s been important has been tightly defining the market Extreme focuses on and how the company sells into that market. The target customer has 200 to 1,000 employees and revenues of $150 million to $1 billion and data centers with 750 to 1,000 servers—although Extreme does have larger enterprise customers as well, Meyercord said. However, most customers are not big companies with large IT staffs, so what they need are solutions that come with the all the hardware and software they need to deploy and operate, rather than products they have to integrate themselves.
“Our customers don’t have a big IT budgets, typically,” Meyercord said. “The complexity factor for customers is more now than it’s ever been.”
Extreme, which now has about 1,450 employees, comes in with solutions that include not only the wired and wireless hardware, such as switches and wireless access points, but also software that includes its ExtremeXOS network operating system and tools for network management, application analytics, security and software-defined networking (SDN). Services also play a role. This solutions approach is a differentiator for Extreme, according to the CEO.
“We’re very focused on solutions,” Meyercord said, noting that rivals including Cisco, Hewlett Packard Enterprise (HPE) and Brocade still talk about the technologies. “Most of our competitors still compete on point products.”
Extreme Networks Sharpens Its Focus on Solutions, Partners, Midmarket
In the quarter that closed in September 2015, about 10 percent of Extreme’s sales came from solutions, he said. A quarter later, that grew to 15 percent, and in the most recent quarter, 18 percent of sales were solutions sales. The Enterasys acquisition has been a key part of the solutions effort, Meyercord and Rice said. Other vendors also are looking to boost their wireless capabilities—such as HPE’s $3 billion acquisition of Aruba Networks last year and Brocade’s recent $1.2 bid for Ruckus Wireless—but Enterasys gave Extreme a time-to-market advantage.
“We were early as far as the convergence of wired and wireless,” he said.
It’s an advantage the company wants to push. According to Meyercord, a year ago, about 30 percent of Extreme’s sales reps sold wireless solutions. Now 100 percent do, and the company often leads with its wireless story.
Extreme also is eyeing five particular verticals: education, health care, manufacturing, government and hospitality, including sports stadiums. That focus has given the vendor deep expertise in addressing the particular needs of organizations in these industries and an expanding roster of customers that can be referenced, according to Rice. Those include household names including Intel, Samsung and Volkswagen, as well as Baylor University, Dallas Area Rapid Transit, the police and fire departments in New York City and Los Angeles, and the NFL and many of its football teams.
Meyercord said the total addressable market for Extreme is about $8 billion, which makes it attractive for other vendors. However, most competitors also are trying to woo server enterprises and hyperscale customers, which can distract them from their midmarket efforts.
“They’re spread out there and we’re very focused,” he said.
Channel partners will play an increasingly important role in Extreme’s efforts in its targeted verticals. The vendor has about 500 partners in the United States and 2,100 worldwide, and Extreme is looking to support them in a variety of ways, from training and incentives to tools and certification programs.
Going forward, Meyercord said the company will continue to broaden its technology portfolio and solutions offerings. Most recently, Extreme last week unveiled ExtremeCloud, a cloud-based management platform for managing both wired and wireless switches and access points. The offering was an example of both Extreme’s focus on solutions and its push to streamline its marketing and branding efforts. The company at one point had multiple products with multiple names, Rice said. Now the company has streamlined its products under names such as ExtremeSwitching, ExtremeWireless, ExtremeAnalytics and ExtremeSecurity.
It also helps company officials better tell Extreme’s story, according to the executives. The vendor in the past had not done a good job getting its message out to the market or the media, which the company plans to focus on as well in the months and years ahead. Indeed, the trip last week to the Boston area to talk with analysts and journalists was part of the effort to increase Extreme’s exposure and define itself and its market.
Over the rest of year and into 2017, the company plans to continue expanding its partner programs and is projecting that financial growth to continue, Meyercord said.
What the company won’t be doing is looking for a buyer, the CEO said. After communications technology vendor Mitel announced last month that it is buying Polycom for $1.96 billion, Zeus Kerravala, principal analyst with ZK Research, posited that Mitel may want to now acquire a networking company to expand its competition with Cisco and others, and mentioned Extreme as an attractive possibility.
“We’re not for sale, especially today,” Meyercord said. “We see way too many opportunities to be distracted by M&A discussions.”
If anything, Rice said, Extreme is now in a better position to be a “consolidator” rather than a “consolidatee.”