Extreme gets a makeover

Extreme Networks’ new chief executive officer Mark Canepa has reorganized the equipment vendor’s corporate structure and business focus as part of an effort to improve the company’s overall effectiveness after a difficult year.

Canepa has eliminated the position of chief operating officer, a role held (according to Extreme’s Web site) by Alexander Gray, a veteran of Lucent Technologies and other companies. The vendor’s manufacturing, customer service and information technology organizations will now report directly to Canepa. He also did away with the position of senior vice president of engineering, a post held by Nortel Networks veteran Siva Ananmalay. Both moves had the goal of excising a layer of management to allow for more agile decision-making.

Canepa has split Extreme’s engineering and product marketing groups into three product groups, each headed by a vice president that will report directly to him. The Scalable Products group will focus on the use of ASICs and be responsible for Extreme’s Black Diamond 10K and 12K Ethernet switching platforms. The Volume Products group will be responsible for the Summit and Black Diamond 8800 edge switching products. And the Emerging Products group will handle the company’s wireless and security initiatives, driving integration of the two. Canepa has already appointed vice presidents to head the Scalable and Emerging divisions and expects to name a head of the Volume unit soon. Canepa also already hired another direct report: a vice president of customer advocacy who will be responsible for profit and loss with regard to customer service and support.

Extreme is also in the midst of transferring the manufacturing of its 8800 product to Asia.

Named last August to replace Extreme’s co-founding CEO, Canepa vowed to overhaul the Ethernet equipment vendor following months of execution problems.

“We’ve begun to address our execution issues,” Canepa said. “We’ve got a long way to go.”

During the company’s fiscal second quarter, which ended in December, Extreme accrued a backlog for its new Summit x450 switches, seeing higher than anticipated demand. “We booked a lot of 450s that I wished I could have shipped,” Canepa said. “Demand was strong because we finally got the power of XOS [Extreme’s operating system], with a feature set you’d expect in a big expensive box in a one-rack-unit stackable with 24 or 48 ports. It’s a lot of features in a small package for a really good price. When you put out something like that, people catch on quick.”

Service providers contributed 27% of Extreme’s revenue in the December quarter, up 4% from a year earlier.

“We’ve been successful over last few quarters in the service provider space, as more service providers get the idea that, by using Ethernet networks, they can provide better services at a lower price,” Canepa said. “The market is moving in our direction. The smaller service providers in the world are quicker to react to these trends. So most of our wins tend to be outside the U.S.”

As part of Canepa’s overhaul, Extreme’s enterprise business will adopt a particular focus on three industry verticals: healthcare, hospitality and higher education. All three types of customers are invested in serving highly transient end users with increasingly sophisticated voice and data applications, Extreme said. In the future, the vendor might branch out to segments with similar needs, including state and local governments, elementary education, financial services and the media industry.

Extreme reported $86.9 million in revenue for the quarter ending in December (82% products, 12% services), a nearly 4% sequential increase and a 6% decrease from a year earlier. Revenue from the United States--down nearly 8% sequentially and 1% from a year earlier--contributed 36% of the quarter’s revenue.

The company increased its headcount by 18 during the quarter to 874. And it paid off all its debt.

“Most of what we’re facing here in the U.S. are internal execution issues. We’re making progress in the Americas, but we’ve got more to go,” Canepa said. “Don’t be surprised if there’s a few bumps along the way.”