Extreme Cuts 110 Jobs
Extreme Networks Inc. (Nasdaq: EXTR) is cutting 110 jobs, about 16 percent of its workforce, in an effort to reduce its annual operating costs by US$20 million and lift its operating income into the double digits.
The company unveiled its restructuring plans as it announced that its fiscal fourth-quarter non-GAAP earnings per share (before one-time costs) are expected to be $0.01-0.02, lower than the previous guidance of $0.03-0.05. However, its revenues for the three months to July 3 are due to be in the range $88-90 million, slightly higher than anticipated.
On average, analysts had been expecting non-GAAP earnings of $0.04 and revenues of $81.6 million for Extreme's fiscal fourth quarter.
The headcount reduction, part of Extreme's ongoing plan to focus on a select number of high-growth sectors with a single product architecture, will affect "all functional areas outside of R&D," and will see its software engineering staff consolidated in "lower cost venues." (See Extreme Goes Big on Ethernet.)
The move, Extreme stated in its official announcement, will enable it to hire new staff in the coming year to focus on new product R&D. The company is planning to launch new "mobility and hosted data center products" during the coming 12 months.
Investors clearly like the cost-cutting talk as Extreme's stock is up by $0.17, a full 5 percent, to $3.57 in pre-market trading early Friday.
— Ray Le Maistre, International Managing Editor, Light Reading
The company unveiled its restructuring plans as it announced that its fiscal fourth-quarter non-GAAP earnings per share (before one-time costs) are expected to be $0.01-0.02, lower than the previous guidance of $0.03-0.05. However, its revenues for the three months to July 3 are due to be in the range $88-90 million, slightly higher than anticipated.
On average, analysts had been expecting non-GAAP earnings of $0.04 and revenues of $81.6 million for Extreme's fiscal fourth quarter.
The headcount reduction, part of Extreme's ongoing plan to focus on a select number of high-growth sectors with a single product architecture, will affect "all functional areas outside of R&D," and will see its software engineering staff consolidated in "lower cost venues." (See Extreme Goes Big on Ethernet.)
The move, Extreme stated in its official announcement, will enable it to hire new staff in the coming year to focus on new product R&D. The company is planning to launch new "mobility and hosted data center products" during the coming 12 months.
Investors clearly like the cost-cutting talk as Extreme's stock is up by $0.17, a full 5 percent, to $3.57 in pre-market trading early Friday.
— Ray Le Maistre, International Managing Editor, Light Reading
Pete Baldwin
12/5/2012 | 4:59:05 PM
re: Extreme Cuts 110 Jobs
Stock's up 6%. Wall Street loves layoffs. (It's probably the higher revenue forecast that's doing it, but that doesn't alliterate.)
-0
12/5/2012 | 4:59:04 PM
re: Extreme Cuts 110 Jobs
> What could possibly go wrong?
Do you think it matters at this stage? IMO gloden days of Extreme (if there were any) are long gone. They are another victim of commoditization and I don't believe player of their size can now survive in the very long run. So cutting expenses is the best option while going downhill...
AlexK123
12/5/2012 | 4:59:03 PM
re: Extreme Cuts 110 Jobs
<Moving their SW engineering staff to "lower cost venues" should do wonders for their software quality>
Most of the "high cost venues" engineers today actually came from the "lower cost venues", so what's the difference? Except the cost, of course...
BigBro
12/5/2012 | 4:59:03 PM
re: Extreme Cuts 110 Jobs
> IMO gloden days of Extreme (if there were any) are long gone.
Couldn't agree more. They've been circling the drain for at least the last 6-7 years, and are now going to throw their ancient code base over the fence to (a) team(s) in "low cost venues"... Let us know how that works out for 'ya.
> Most of the "high cost venues" engineers today actually came from the "lower cost venues", so what's the difference? Except the cost, of course...
Quality, in my opinion.
To be clear, there is excellent engineering talent in the "low cost venues", but nowadays, those people are compensated very well. Maybe not quite the "high cost venue" comp, but it's not the oft-quoted 1/3 of comp, either. On the flip-side, you can get some pretty inexpensive engineering "talent", but you get what you pay for, IMO.
EXTR's stated goal is to cut costs by going to the low-cost venues, which tells me they're going to hire the lower-quality talent in the low-cost venues.
So you're right: I should not have quoted just the "low-cost venue" without also mentioning the "cutting cost" aspect of the statement.
joepopspopper
12/5/2012 | 4:59:00 PM
re: Extreme Cuts 110 Jobs
They like the layoffs but Extreme needs to be sold - a penny stock for years, they cannot seem to grow revenues past the 500M mark, they rely on a handful of BIG accounts to accomodate their revenue and their lack of innovation is gone.
PURPLE in closets does not match the color of today - LIME GREEN :-)
AlexK123
12/5/2012 | 4:58:59 PM
re: Extreme Cuts 110 Jobs
>> Most of the "high cost venues" engineers today actually came from the "lower cost venues", so what's the difference? Except the cost, of course...
>Quality, in my opinion
I do agree that a traditional "Let's hire a bunch of cheap guys" approach results in low quality of the final product, if you are lucky to get one of course.
However, after a few years of work in a multinational company I am convienced that if you make them partners of your success, engineers in lower cost venues are equally professional, work more hours, better motivated and are more than capable of creating high quality products.
Moving their SW engineering staff to "lower cost venues" should do wonders for their software quality... What could possibly go wrong?