Extreme Networks today announced that it has completed the acquisition of Brocade’s data center switching, routing and analytics business, completing one of the most remarkable and unlikely turnaround stories in tech history.
In the technology industry, rising from the ashes is very rare. Once a vendor, no matter how big, starts to slide, it generally has a bad outcome. Consider all the giants in networking alone that went from 800-pound gorillas to a puff of smoke seemingly overnight. Names including Lucent, Nortel, 3Com, Cabletron, Marconi and Fore Systems, once seemingly mighty powers that could never be toppled, are now all gone. Some vendors have avoided that fate by going private to revamp the company without the pressure of meeting Wall Street expectations every quarter. Recent examples of this are Polycom, Riverbed, Dell and Solar Winds.
Extreme seemed to be heading down the path toward irrelevance if not demise. A few years ago, it replaced its CEO, CMO and chief revenue officer after a botched merger with Enterasys. The stock was trading at an all-time low, and it looked as if a new management team, led by CEO Ed Meyercord and chief marketing, development and product operations officer Norman Rice, had been brought in to find a buyer to make the best of an increasingly bad situation.
But something happened along the path to being just another failed networking company. Instead of closing shop, the company decided to go on a shopping spree and did it with lightning speed in a rather unorthodox way. Instead of going private or hiring a banker or any other outside resource, the company chose to open up a line of credit and do it itself.
The turnaround started nine quarters ago, and since then Extreme has been nine for nine in issuing a “beat and raise” on its quarterly earnings calls. With the addition of Brocade’s business, Extreme is now on a run rate that exceeds $1 billion in revenue, making it the largest enterprise pure-play network vendor and the No. 3 overall. Over the past two years, no vendor has had a more highly publicized run of success and excellence than Arista Networks (and deservedly so), and yet over that time period, when Arista’s (ANET) stock price saw a whopping increase of 137.9%, Extreme’s (EXTR) stock grew 335.9%.
The turnaround started with the acquisition of Zebra’s Wi-Fi assets. That got Extreme into a number of top-tier businesses such as WalMart and FedEx, giving its channel an opportunity to sell a broader wired/wireless solution. Extreme then added Avaya’s Network business, which gave it a best-in-class campus fabric that could also be used in small data centers, and added a number of new channel partners, expanding its reach.
Now it’s added Brocade’s data center business. While Zebra and Avaya were nice additions, and certainly helped boost the business, the acquisition of Brocade puts Extreme’s big-boy pants on. The company can now compete for any business in any Enterprise, no matter how large, as well as some service providers. Unlike many of the pure-plays in networking, Extreme has a portfolio that spans from the Wi-Fi edge to the campus, branch and all the way into the data center.
With the closing of Brocade, Extreme acquires its SLX, VDX, MLX, CES, CER products as well as the Workflow Composer and Automation suites. Of equal importance, Extreme inherits some strong customer relationships and personnel. Brocade is well-known in the networking industry as always being on the bleeding edge of technology and tends to cater to early-adopter types of customers. The hardware platforms are certainly big and beefy, but its software products, such as Workflow Composer, address the needs of cloud-centric organizations that have shifted to a DevOps model. Wayne Gretzky said he always “skates to where the puck is going to be”; tools such as Workflow Composer are where the network puck is going as it makes network operations easier making it mandatory for future success.
Old-school network professionals lived, if not thrived, in a world where complexity was the norm. Digital transformation requires businesses to move with speed and a network that is simpler to operate. This doesn’t mean a simple network with no features. It means a technically sophisticated network with good software to streamline and automate operational tasks. Workflow Composer, Extreme Analytics and the Avaya Fabric are good examples of a software overlay that lowers the complexity of running a network and sets up Extreme well for future success.
There’s a shift happening in networking today. Trends such as the internet of things, mobility and the cloud have raised the overall importance of the network, since none of those technologies works without a robust, resilient and secure network. Now that the turnaround of Extreme is complete, it will be in a better position to compete for business where it didn’t have the portfolio, channel or size to do so before.