Ethernet equipment

Extreme Scores Hat Trick

Extreme Networks Inc. (Nasdaq: EXTR) stock fell more than 8 percent in after-hours trading yesterday after the company reported revenue declines -- for the third quarter in a row.

For its fourth quarter, which ended July 2, Extreme reported net losses of $1.8 million, 2 cents per share, on revenues of $82.4 million compared with losses of $2.8 million, 2 cents per share, on revenues of $85.5 million in the previous quarter. (See Extreme Reports Q4.)

For its fourth quarter a year ago, Extreme reported net income of $100,000, zero cents per share, on revenues of $96.1 million.

Extreme's non-GAAP net income of zero cents per share ($400,000 total) fell short of the consensus forecast of 4 cents per share, according to Thomson Financial . And revenues lagged the $88.2 million analysts had expected.

Extreme stock was down 32 cents (8.6%) at $3.41 in after-hours trading.

Product revenues might have risen from the previous quarter had Extreme not run into "product constraints," officials said on yesterday's conference call with analysts.

"The good news is we saw strengthening demand for our modular systems," namely the BlackDiamond series, CEO Gordon Stitt said on the call. The bad news is that demand was so high that Extreme "missed some shipments late in the quarter," he said.

Extreme will be increasing its inventory to compensate and expects to catch up on those shipments this quarter. Still, the result for the end of June was the third consecutive quarter of declining revenues. (See Extreme Miss and Extreme Slump Continues.)

It's not certain Extreme would have met analysts' $88.2 million forecast for revenues even if it had made all of its shipments, CFO William Slakey said on the conference call.

The quarter's results just add to the uncertainty surrounding the company's executive turnover. Stitt recently announced plans to step down as CEO, although he'll still be involved with Extreme, and Slakey is starting the process of leaving the company. Permanent replacements for the two haven't yet been named, although Stitt noted during the call that the CEO search has been narrowed down to a handful of candidates. (See Stitt Gets Less Extreme and Extreme Swaps CFOs.)

Stitt reiterated during the call that his departure isn't related to Extreme's fortunes. "This decision was a personal one based on a commitment I made to my family several years ago," he said.

Separately, Extreme is still planning to move to new headquarters in the second half of 2007, following a sale of the property it occupies now. The property first has to be rezoned for residential development, a process that's expected to take at least a year.

— Craig Matsumoto, Senior Editor, Light Reading

metroman 12/5/2012 | 3:46:10 AM
re: Extreme Scores Hat Trick What was he trying to say.... because we sold more than we were expecting we could not ship as much as we had forecast.....

So either the forecasting is wrong, manufacturing is out of control or a load of Stitt?

Hanover_Fist 12/5/2012 | 3:46:09 AM
re: Extreme Scores Hat Trick Networking companies focused only on Gigabit & 10 Gigabit Etherent technology face a future similar to the polar ice caps during this time of global warming...they are going to slowly melt away and disappear unless they do something completely different.

However, those in charge won't because it means that they have to face a world where they can no longer claim they know everything (afterall, they all are egotistical manical dictitorial micromanagers).

Evolve or die - Gordon's finally realized that and hopefully is not Enronning his stock holders.
twill009 12/5/2012 | 3:46:08 AM
re: Extreme Scores Hat Trick In yesterdayGÇÖs Extreme Networks earnings release (where they badly missed sales and earnings expectations), CEO Gordon Stitt had this to say:
GÇ£We are pleased with our year-over-year improvement in non-GAAP profitability.GÇ¥
Non-GAAP net income
June 2005: $256k
June 2006: $416k
To add insult to injury, that is after backing out about $2 million in stock compensation.
Pete Baldwin 12/5/2012 | 3:46:07 AM
re: Extreme Scores Hat Trick Interesting comments, everyone -- thanks for posting. Gotta love that we drew global warming into the discussion. (LR got an email today, a reader who seems to have found us by doing web searches on global warming. Heh.)

Regarding being unable to keep up with demand ... Stitt implied that Extreme keeps less inventory than usual, making it tough to catch up when demand surges. (I think his exact wording was that they have more turns than is usual.)

So, they're beefing up inventory this quarter to make up the shortfall.
metroman 12/5/2012 | 3:46:06 AM
re: Extreme Scores Hat Trick The only reasons to hold less inventory than usual are:

1. You don't trust your forecasting
2. You think you can turn quickly in a surge
3. You have cash issues
4. You think sales are slowing

If 1 - you're the CEO, fix it
If 2 - You failed in this case
If 3 - Investors beware
If 4 - Run away (oh.... you are.)


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