Despite issues obtaining parts and a large backlog of orders, Extreme Networks generated record revenue of nearly $300 million in Q1 FY23, up 11% year over year and 7% sequentially.
The backlog CEO Ed Meercord mentioned on the company’s quarterly earnings call this week was $555 million, also a record. Looking at it another way, nearly three-quarters of backlog product revenue is mainly due to supply chain issues. Economic concerns are also in the mix, but Meyercord said things are looking bright when it comes to network investment.
“Our continued revenue growth and record backlog make us more confident in our long-term growth prospects,” he said. His optimism stems from what he said is the corporate belief that the network is a strategic asset that Extreme strives to Makes deploying and managing these networks simple.
“We’re not seeing network plans being de-prioritized,” he said. “If enterprise customers have to cut back, it’s not like we don’t see them not taking networking seriously.”
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Wireless is very powerful
One area where revenue has grown significantly but has a “significant” backlog is wireless, where Extreme is pushing hard for WiFi 6E technology.
“If you think about you know the way we live and work and shop and you think about the environment and how much of it is wireless versus wired, you know it’s growing and I do think there’s a life cycle for wireless as well. Shorter than a traditional wired switch. So there are more upgrades and I think the volume and turnover is greater in the wireless space,” Meyercord said.
This includes cellular wireless technologies, including 5G for environments where Wi-Fi is not the best option. “[A]nd you see things like smart cities, longer range, lower latency, private cellular networks, support for driverless cars – these things – are not your traditional Wi-Fi solutions,” Meyercord explain. “So I think you’re going to see some of these other technologies emerge…”
Gartner said this month that no single wireless technology will dominate, but enterprises will use multiple wireless technologies to support a range of environments, from office Wi-Fi, mobile device services, low-power protocols and even radio connectivity. Gartner predicts that by 2025, 60% of enterprises will use five or more wireless technologies simultaneously.
“We will see a range of solutions in the enterprise, including 4G, 5G, LTE, WiFi 5, 6, 7, all of which will create new data that enterprises can use for analysis, while low-power systems will collect energy directly from Network. This means that the network will be a source of direct business value,” Gartner said.
machine learning
Meeyrcord said Extreme is looking to continue to expand and develop its automation, artificial intelligence and machine learning capabilities through ExtremeCloud IQ’s cloud-based wireless and wired network management products, including ExtremeCloud IQ CoPilot. The idea is that, through its AI/ML technology, the company can identify network issues that customers may not have seen or been aware of before and fix them automatically, Meercord said.
Recently, Extreme upgraded CoPilot to support digital twins, virtual copies of physical devices that organizations can test before making changes to the real device. For example, testing on virtual twins can validate new network switches, access points and their configurations before putting them into service, the company said.
Supply chain problems are not limited to Extreme
The supply constraints Meyercord mentioned are common. Extreme rival Juniper Networks said this week that its order backlog was $2.3 billion, down $100 million from the previous quarter. Other companies such as Cisco and Arista are likely to report the same type of backlog issues in the coming weeks, as deliveries of some routers, switches and other equipment have been delayed by more than six months.