Is Extreme Networks Ready for 3Com Shops?

3Com users considering a transition to Extreme Networks Inc. as their core LAN switch supplier will deal with a company that has one-thirtieth the workforce of 3Com and much less network experience.

On the other hand, 3Com customers will gain a supplier that is focused exclusively on Layer 3 gigabit switching and has achieved greater success in this market than 3Com. 3Com lost two-thirds of its market share in Layer 3 Ethernet switching between 1998 and 1999, according to the Dell'Oro Group.

3Com recently announced that it is discontinuing the CoreBuilder LAN switch line, among other products, in an effort to streamline the company to attack new and higher-growth markets.

3Com's cancellation of the CoreBuilder switch angered customers, many of which were not made aware of the move before 3Com announced it or the press got wind of it. The company is urging customers to transition to Extreme and its BlackDiamond switch, and has set June 30 as the last customer shipment date for CoreBuilder products.

Most customers are apparently balking at the migration to Extreme, according to an informal survey on Network World's Web site. Some do not feel comfortable dealing with a company as young and lean as Extreme in a market dominated by Cisco. Others are reluctant to accept any advice or guidance from 3Com after the company pulled out the rug from under them.

What users may be overlooking is that Extreme posted a 206% increase in revenue for the second quarter of fiscal 2000 from the second quarter of 1999. Income during the same time period was $6.4 million vs. a loss of $2 million.

Extreme's customer list includes Barnes and Noble, Scottish Hydro, the Institute of Nuclear Power Operations and PSINet. And Extreme claims to be the first network company to ship more than one million Layer 3 ports in two and a half years.

"This is nice, but there are plenty of companies to go to," says Esmeralda Silva, an analyst at IDC.

Young and quick

Extreme is certainly younger and smaller than 3Com. The company was founded in 1996, went public in 1999 and employs 400, vs. 3Com, which was founded in 1979 and employs 12,000. But Extreme will be hiring 200 new salespeople from 3Com, which will effectively double its sales force.

However, these are salespeople who had little success selling 3Com's CoreBuilder line. Will they benefit Extreme?

"We acquired 200 seasoned network professionals selling into large-named accounts," says Gordon Stitt, president and CEO. "We're happy as can be."

Extreme has $310 million in cash, which can be used for acquisitions, and invests 14% of its revenue in research and development.

The competition

Extreme has some strong competitors also gunning for the stranded 3Com shops. Foundry Networks is matching Extreme's 70% discount for CoreBuilder customers, while Enterasys - Cabletron's enterprise spinoff - is offering pricing of $1,000 per CoreBuilder Gigabit Ethernet port and $100 per 10/100M bit/sec port.

Cisco is offering 3Com users a range of discounts through its Competitive Technology Migration Program, says Soni Jiandani, vice president of marketing in Cisco's Enterprise group. Jiandani did not divulge numbers, but says "Cisco will be very, very competitive vis-a-vis our competitors."

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