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Shares of enterprise networking specialist Extreme Networks (NASDAQ: EXTR) gained 148.9% in 2017, according to data from S&P Global Market Intelligence. The former one-trick pony closed several acquisitions last year, creating a well-rounded network provider for the data center and kick-starting some fresh organic growth by the end of the year.
Between the fall of 2016 and October 2017, Extreme closed several strategic buyouts, including Wi-Fi specialist Zebra, networked storage expert Brocade, and jack-of-all-trades Avaya. The resulting mini-conglomerate covers every corner of the corporate data center's networking needs, with a healthy side order of longer-range metro networking tools. At the heart of it all, Extreme offers a suite of virtual network management software to organize it all.
Throughout this transformative year, Extreme exceeded Wall Street's earnings estimates in all four of its published quarterly reports.
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These acquisitions are already making a difference.
The Brocade buyout alone is expected to add $230 million of additional revenue in fiscal year 2018, which ends on June 30. Before this buyout binge, Extreme's entire top-line take stopped at $528 million per year. The deal is also expected to deliver positive earnings and cash flow contributions from the get-go.
On top of the straight-up additional revenue from the recently acquired assets, Extreme is using its complete package of networking solutions as a selling point, reportedly stealing market share from Cisco Systems (NASDAQ: CSCO) and HP Enterprise (NYSE: HPE). The big boys of data center networking are getting some new competition here, and Extreme's management deserves a fruit basket for its smart and swift integration of these buyouts.
Looking ahead, the stock is trading at just 12 times forward earnings, and Extreme Networks could be a great investment even if you missed last year's skyrocketing surge.
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