Extreme Networks: Supply chain-woes, backlogs, higher prices

Supply chain issues continue to drive networking equipment prices up and impact delivery schedules but despite them, Extreme Networks reported solid product revenue this week.

Extreme said its Q3 results were its fifth consecutive quarter of double-digit product revenue growth—$285.5 million, up 13% year-over-year—driven by sales in its cloud, universal-switching platforms, and Wi-Fi 6E access points. Competitor Juniper Networks reported solid results this week, too, saying it had a fourth consecutive quarter of double-digit year over year growth in cloud, but also enterprise business growth of nearly 20% year over year.

While Extreme’s results are solid, its backlog of orders is growing substantially, up $130 million just in Q3, with a total backlog of $425 million, largely due to industry-wide semiconductor supply-chain issues. More than half of that consists of the company’s latest generation products, according to Extreme’s presideint and CEO Ed Meyercord.

The supply chain is hitting other networking vendors, too. For example, Cisco reported a backlog of nearly $14 billion last quarter, and Juniper said a couple of months ago it had a “record level of more than $1.8 billion” in backlogs. 

For Extreme, getting parts other than processors has also become harder. “The industry-wide global supply-chain environment became more challenging this quarter due to constraints on secondary and tertiary component supply, such as power supply components,” Meyercord said. “Our lead times are as good and competitive or better than the rest of the industry and that backlog piece is committed orders. They’re not going away.”

Exreme’s non-hardware products are also affected, with a “significant backlog of subscriptions and service revenue that will be recognized when supply chain constraints ease,” he said.

Price increases too have affected prices that customers pay, “which has helped us offset the increased cost to supply chain,” Extreme’s CFO Remi Thomas said during the company’s financial analysts call.

While the fiscal challenges will likely continue for the foreseeable future, Extreme is looking to further pursue 5G, Wi-Fi 6E, and managing cloud resources.

The company says it has been working with an unnamed service provider to explore the use of 5G services at the WAN edge utilizing Extreme’s Cloud Native Infrastructure Solutions platform. CNIS targets 5G core networks and setting up networked, containerized applications. “A lot of their customers are moving from proof-of-concept with 5G into real live projects, so we see a lot of growth opportunity there,” Meyercord said. 

Meyercord also said using 5G as a private enterprise offering is also something his company is developing. In March it teamed with Cradlepoint to develop LTE, 5G, and Wi-Fi 6/6E technology. (Cradlepoint has been owned by Ericsson since 2020.)

“A lot of our partners are putting Extreme together with Cradlepoint for 5G access and cellular access out at the WAN edge,” Meyercord said. “A lot of people especially in the public sector, are looking at that solution, and that’s something we are active with.”

He said that within just two quarters, Wi-Fi 6 and 6E have become 10% of Extreme’s bookings, signifying a fast adoption curve by customers.

Extreme has been listed as a leader in the Gartner Maguc Quadrant for wired and wireless infrastrure  for the past four years. Its 4000 Series wireless access points support Wi-Fi 5, Wi-Fi 6, and Wi-Fi 6E standards. 

As for data-center management, the company’s cloud-based wireless and wired network-management offering, ExtremeCloud IQ (XIQ) and its CoPilot AI-based management tool will be up graded to add data-analytics, machine-learning, and AI capabilities, he said.

“The more you put the cloud, the more powerful it is,” Meyercord said. “We’re investing in kind of the data analytics side of the equation and kind of this end-to-end data center and all the way to the edge and out of the wide area network and branch.”

As the network becomes more intelligent, businesses can use information it gathers to feed into other systems, he said, “And that is the next frontier.”