The world of technology has seen more disruption in the past 18 months than in any other period in history. Businesses have accelerated digital transformation plans and introduced several new technologies, such as cloud, mobility, IoT and edge computing.
The commonality for these is that they are all network-centric technologies, meaning the network plays a key role in how well they perform. The need for a top quality, modernized network is now receiving C-level visibility in organizations. A good data point to support this comes from a recent survey of mine where almost 70% of business leaders stated the value of the network has increased since the start of the pandemic.
Another set of proof points comes from the recent financials of three of the industry’s top network companies – Extreme, Juniper and Arista with Cisco on deck to report later this month. In my most recent ZKast, done in partnership with eWEEK eSPEAKS, I discussed the results with ESG’s Bob Laliberte. Highlights of the discussion are below:
- Extreme Networks posted revenues of $278.09M for the quarter ending June 2021, handily beating Street expectations by 5.4%. This is also up significantly from the $215M it posted same quarter 2020.
- Quarterly earnings were $0.19 per share, slightly ahead of the expected $0.18 but well ahead of the $0.03 from a year ago.
- The strong quarter put Extreme over $1B in annual revenue for the first time in its history.
- The stock recently saw a 7% boost when financial firm Needham put a buy rating on the stock.
- Needham is expecting some near-term margin pressure due to the current chip shortage but expects the company to flourish after.
- During the quarter, Extreme became the first vendor to offer WiFi 6E.
- Extreme’s growth comes on the heels of a number of strategic acquisitions, particularly Aerohive, which brought cloud-based management.
- Recent release of Universal Hardware gives customers the ability to deploy what it needs today but shift in the future.
- Extreme CoPilot lets customers deploy AI but in a way that minimizes risk.
- Revenues were $1.17B, ahead of the Street’s estimate of $1.14B and up from $1.09B when comparing to a year ago.
- Net income, on a non-GAAP bases was $0.43 per share, which was a $0.04 beat versus consensus estimates and up from $0.35 a year ago.
- Company guided to $1.2B for FY21 Q3, which was light when compared to what expectations were.
- During the call, CEO Rami Rahim did cite the continued shortage of chips, leading the longer lead times and elevated costs.
- Juniper, traditionally a telco first company, has diversified its business. Of the top 10 customers in the quarter, four were cloud, five were service provider and one was enterprise.
- Looking at revenue by segment – cloud was $320M, service provider $444M and Enterprise is now at $408M and is Juniper’s fastest growing segment.
- Enterprise growth has been fueled by key acquisitions of 128 Technology, Apstra and Mist.
- Mist’s AI engine is considered one of, if not the best in the industry and its use is now pervasive across the Juniper product line.
- Revenues grew 30.8% to $707M, a solid beat of $18M and up 30% compared to the same period last year.
- GAAP gross margins were 64% up slightly from 2020.
- Company guide was strong. The midpoint of the $725M to $745M range was $37M ahead of consensus estimates.
- Arista passed 50M cloud managed ports in the quarter.
- Consistent with other vendors, management did cite longer lead times due to the chip shortage.
- Drivers for Arista include:
- Cloud titan vertical remains strong and driven by 400G upgrade cycle. While 400G is off the radar of most enterprises, I do expect it to be mainstream in a couple of years and network professionals can get insight as to deployment best practices from current deployments.
- Strength in enterprise. Arista, once thought of as a cloud networking specialist has diversified and is gaining enterprise traction. It’s CloudVision management portal is loaded with AI capabilities and charts a path to autonomous operations. The BigSwitch monitoring fabric provides excellent visibility and data for network operations.
- Arista’s acquisition of Awake Security combines AI and security to accelerate threat detection and remediation. Arista’s addition of security opens new use cases and buying centers.
- Arista recently announced an ultra-low latency switch solidifying its high performance roots.
- Cisco reports numbers later this month
- Given the strength its competitors are seeing, Cisco should also report strong network numbers.
- The trend towards cloud management puts Meraki in a good position.
- Cisco has increasingly been trying to tackle bigger problems, such as hybrid work, hybrid cloud and other trends that drive larger suite sales.
- The ability to tie AppD to ThousandEyes to Nexus, etc, drives a “1+1=3” value proposition for Cisco.
- Cisco remains the bell weather for the tech industry and how it reports is an indicator of what is to come.
As mentioned previously, network value continues to increase. There are many shifts underway including SD-WAN, SASE, 5G and WiFi6 and businesses should be investing in the network to modernize it. Because of the chip shortage, businesses should be aggressively investing now to ensure they can get product when its available.