Extreme climbs following strong IPO

Communications equipment upstart Extreme Networks enjoyed a warm reception on Wall Street today, seeing its stock roughly triple in its first day of trading after a strong initial public offering.

Extreme, one of the first networking equipment providers to go public in some time, floated an initial offering of 7 million shares priced at $17 per share. At the close of the market, Extreme's stock gained more than 200 percent, at one point trading as high as 65.125 a share on the Nasdaq market.

The stock---trading under the symbol "EXTR"--closed at 55.3750, up more than 225 percent for the day.

The company is one among a myriad of start-ups that grew up around the emergence of a new speed boost for Ethernet, the technology used to connect PCs and servers across a network. With the arrival of Gigabit Ethernet, a slew of firms scrambled to take advantage of what is expected to be a multibillion-dollar opportunity, so far with varying degrees of success.

Extreme is the first firm in the Gigabit Ethernet networking wave to go public.

Other start-ups were consumed by larger players, such as the Bay Networks arm of Nortel Networks, Cisco Systems, and Lucent Technologies.

Extreme makes a series of high-end switching devices used to connect together computers and campuses of networks. The Extreme public offering will be closely watched among followers of the networking industry, given the increased consolidation in the sector and the emergence of a few large multibillion-dollar players as bellwethers.

Market watcher the Dell'Oro Group pegged the market for advanced switches like the kind made by Extreme--sometimes called Layer 3 switches--at $577 million for 1998. The firm predicts the market will grow to $3.4 billion by 2001.

In addition, an Extreme competitor, Foundry Networks, has floated the idea of going public this year and may look to the performance of Extreme's offering for guidance.

Extreme was one of a handful of nascent firms that separated itself from other start-ups by focusing on high-end technology that could be used in conjunction with the pure speed increase of Gigabit Ethernet.

By doing so, the company has placed itself on the path to high-growth. Though Extreme hasn't yet turned a profit, the company posted sales of $55 million for 1998, according to documents filed with the Securities and Exchange Commission--up from $7 million in sales for 1997.

The huge sales jump was accomplished, in part, by complementing an in-house sales model with a licensing strategy that includes computing giant Compaq Computer as an Extreme customer.

Investment bank Morgan Stanley Dean Witter served as a lead underwriter for the offering.