Extreme to Dump Layer 4-7 Switching?
According to sources close to the company, Extreme is phasing out its SummitPx1 and PxM Layer 4-7 switching products. The SummitPx1 is a single-port, Gigabit Ethernet switch that sits in front of Web server farms to direct traffic to the appropriate server based on packet inspection done at Layer 4, the transport (TCP/IP) layer of the Open Systems Interconnect (OSI) Reference Model; and Layer 7, the application layer. Extreme's other new product, the PxM module, does the same job as SummitPx1, but fits into a BlackDiamond 6800 chassis.
Extreme officials wouldn’t comment on the speculation, citing the company’s quiet period at the end of the quarter.
The news comes as little surprise to analysts and other industry observers. “I thought they had already gotten rid of this product line,” says Mark Sue, an analyst with CE Unterberg Towbin.
The company has never gotten much traction with the product that was launched back in September 2001. In fact, it didn’t even show up in market share figures for the fourth quarter of 2002, according to Infonetics Research Inc. For the fourth quarter of 2002, Cisco Systems Inc. (Nasdaq: CSCO) garnered 35 percent of the market, Nortel Networks Corp. (NYSE/Toronto: NT) 20 percent, F5 Networks Inc. (Nasdaq: FFIV) 13 percent, Radware Ltd. (Nasdaq: RDWR) 10 percent, and Foundry Networks Inc. (Nasdaq: FDRY) 7 percent.
Part of Extreme's problem could be that it entered the market late. Its competitors had all been selling equipment into this sector for at least a year before Extreme threw its hat into the ring. Cisco had actually acquired its Layer 4-7 switching capability when it bought Arrowpoint back in 2000 for $5.7 billion in stock. Nortel also bought its kit in 2000 from a startup called Alteon for $9.1 billion in stock.
Like Cisco and Nortel, Extreme entered the market through acquisition. In March 2001, it bought WebStacks Inc., an early-stage startup, for $15 million in cash and $3 million in stock.
But it wasn’t just being late to market that kept the SummitPx1 from selling. The data center switch market has changed over the last couple of years, says Sue. The number of new data centers is actually slowing as service providers consolidate Web hosting facilities.
“Most of the bigger vendors have realized that the market is much smaller than they had originally planned,” he says. “Even Cisco has stepped back from pushing its Arrowpoint switch.”
According to Infonetics Research Inc., worldwide sales of Layer 4-7 switches only generated $519 million in revenue for 2002. That figure is only expected to grow at an average rate of 3 percent per year to about $570 million by 2005. Compare this to what market researchers had predicted two years ago. The Dell'Oro Group predicted the Layer 4-7 Web switch market to exceed $3 billion in 2005, according to Extreme’s press release when it launched the SummitPx1.
The SummitPx1 has other issues, as well. It lacks key features like Secure Sockets Layer (SSL), an encryption methodology used to protect Web communications. The SSL security protocol provides data encryption, server authentication, message integrity, and optional client authentication for a TCP/IP connection. Because SSL is built into all major browsers and Web servers, simply installing a digital certificate turns on their SSL capabilities. Web switches, such as those from Cisco, F5 Networks, Nortel, and Radware, support SSL, which means they can continue to forward and load balance traffic at high speeds even if SSL is turned on.
According to Infonetics, Layer 4-7 switching combined with SSL is the fastest growing segment within the Layer 4-7 Web switch category, with an expected annual growth rate of about 24 percent.
— Marguerite Reardon, Senior Editor, Light Reading