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Strategies & Market Trends : Cents and Sensibility - Kimberly and Friends' Consortium -- Ignore unavailable to you. Want to Upgrade?

To: vagabond who wrote (80804)	3/1/2000 11:52:00 AM
From: judge	Respond to of 108040

EXTR nice article just came out today on extr..Stock of the Day Mar 01, 2000 Extreme Networks: High Speed Chase The rapid adoption of next generation networking technology has fueled some incredible stock moves in the past year. While hardly a disappointing performer, Extreme Networks (Nasdaq:EXTR - news) has lagged the moonshot stock runs by some of its peers in the Layer 3 switch business. It did make up a little ground on Tuesday, though, jumping 17 points to 111 after an apparently bullish presentation at the Robertson Stephens Tech 2000 conference. Extreme Networks makes Layer 3 switches which integrate advanced routing and traffic management functionality into a lower-cost, higher-performance solution for network managers. Demand for these switches is driven not only by the soaring levels of traffic, but by the proliferation of new applications being networked. These include e-commerce and enterprise resource planning (ERP) applications, as well as voice and video traffic. Network managers need the ability to implement policy-based quality of service for these various applications, that is, prioritizing traffic and applications by allocating bandwidth. Extreme's Layer 3 switches provide this quality of service bandwidth management capability, not to mention significant price/performance advantages over conventional LAN routers. Extreme Networks has an impressive 25% of the market (by unit volume) for Layer 3 switching technology, according to Hambrecht and Quist. This market is expected to grow at a 100% annual rate for the next several years to exceed $10 billion in 2003. Extreme leads the enterprise market for Layer 3 switches and is moving into the Internet Service Provider (ISP) market as well. The enterprise market refers to big corporations (or other organizations) which have embraced the use of Internet Protocol networks to transfer data within the company but increasingly need them to handle other applications like e-commerce, marketing and other communications with customers and vendors. Extreme's enterprise customers include Compaq, Sun Microsystems, Shell, MSNBC, eToys, and Barnes & Noble. The ISP market has been dominated by some of the more diversified networking giants like Cisco Systems (Nasdaq:CSCO - news) as well as relative newcomer Foundry Networks (Nasdaq:FDRY - news) , but Extreme is making progress here as well. Customers include AT&T, Excite@Home, PSINet and RealNetworks. The ISP market offers enormous growth potential especially in areas like web-hosting service providers (e.g., Exodus) where business is taking off and the need for Layer 3 switches is clear. How well Extreme Networks penetrates the service provider market may be a key to getting comparable valuation with its switch vendor peers. Which brings us to Extreme's laggard performance relative to Foundry Networks, Juniper Networks and some of the other networking infrastructure superstars from the IPO class of 1999. Certainly Foundry's focus on the more attractive ISP market has helped. Another factor came last November when Morgan Stanley Dean Witter said it did not expect Extreme to deliver any upside earnings surprises for its fiscal second quarter which ended December 31 (it wound up beating the consensus by 2 cents in that January 19 report). Other analysts have come to Extreme's defense, however, noting that the introduction of a new chipset across its product line is encouraging some customers to defer shipment until this quarter and that the upgrade cycle should be viewed with a slightly longer-term perspective as a catalyst for sales in 2000 and beyond. It's worth noting that Extreme Networks is already profitable and the consensus is for earnings of $0.44 per share in the fiscal year 2000 ending in June and $0.70 next year. Revenues are expected at well over $200 million this year from $98 in FY99. A 5-year annual growth rate of 46% is predicted. With its Layer 3 switching technology, Extreme Networks is clearly establishing itself as a leader in networking infrastructure. Investors are keen on the infrastructure angle because it is not only fast-growing and tied to the Internet, but demonstrated as a profitable business. The question facing investors is whether Extreme will catch up to its peers in terms of valuation, or whether the pack will come back to it. Tuesday's advance is a step in the right direction. - James Hale The Online Investor -------------------------------------------------------------------------------- Archives: [ Thu Dec 30 \| Wed Dec 29 \| Tue Dec 28 \| Mon Dec 27 \| Thu Dec 23 \| more ] -------------------------------------------------------------------------------- Enter one or more