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With the recessionary feel of the current economic environment, punctuated by a deceleration in IT spending, what are the chances for an Ethernet switching company with flat to declining market share and increasing competition in an already crowded market?

Pretty good, at least according to the president and CEO of Extreme Networks. 

Despite expectations of consolidation in the Ethernet switching industry and a need for players to attain expertise in Web 2.0, collaboration, video and other trendy new software applications, Extreme says the time is ripe to be small, nimble and one of the best at what it initially set out to do -- build Ethernet networks.

"We're focused on Ethernet and the network, and we stay there," says Extreme CEO Mark Canepa. "We should stay focused to those things that we are really good at. And then to go create the right set of partnerships."

But thus far, Extreme has had little success in growing market share from that strategy. The company had but 1.6% of the $18 billion Ethernet switching market in 2007, down from 1.7% in 2006 and 2.2% in 2005, according to Dell'Oro Group.

The company's share has declined slightly in recent quarters as well, with 1.5% in the first quarter of 2008, compared with 1.7% in the first quarter of 2007 and 1.6% in the fourth quarter of 2007, according to Dell'Oro.

Cisco owns over 70% of the market, Dell'Oro states.

"What you have are 10 or 11 major players all vying for 30% of the market," says Steve Schuchart of Current Analysis. "A company like Extreme needs to be able to concentrate and do what they do very well. If there's any weakness in their platform it's going to translate into a loss of market and a loss of sales."

"The market for Ethernet switching has matured and evolved," says Zeus Kerravala of The Yankee Group. "What exactly does Extreme offer that you can't get from one of the vendors that have done a really good job of branding themselves in that space? They never created any kind of market identity."

Away from the network, Extreme has been the focal point of acquisition rumors. A longstanding one was Juniper Networks sizing up the company as it prepared for its entry into Ethernet LAN switching.

But Juniper developed its own switches (see results of our tests on Juniper's new switches). So the most recent speculation shifted to competitor Enterasys Networks possibly eyeing rival Extreme as Enterasys looks to approach $1 billion in annual revenue in order to better compete with the incumbent dominance of Cisco and the entry of Juniper.

Canepa downplays industry consolidation as a way to grow to better compete in a changing marketplace. He seems to favor more organic avenues to grow Extreme beyond its current $350 million to $400 million in annual revenue.

"We're focused on growth by selecting the markets where we're going to compete and by focusing on solving the kinds of problems our customers have," Canepa says. "If we do that right and if we stay focused on our vision and our strategy, then we're going to continue to grow and we'll see where that will take us."