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Ethernet equipment

Stitt Gets Less Extreme

Disappointed Extreme Networks Inc. (Nasdaq: EXTR) investors won't have CEO Gordon Stitt to kick around for much longer. Not as CEO, anyway.

Extreme announced late Friday that Stitt will be stepping down as CEO "during the 2006 calendar year." (See Extreme CEO Steps Down.)

An independent director on Extreme's board is spearheading the search for a replacement, and Stitt is aiding in the search.

Stitt was a founder of Extreme in 1996, along with Stephen Haddock and Herb Schneider, who are Extreme's CTO and vice president of R&D, respectively. So, Stitt's departure marks a life-changing event for the company.

He won't be gone for good, though. After a new CEO takes over, Stitt will become Extreme's chairman. He'll replace W. Michael West, an outside director and former Larscom Inc. (Nasdaq: LARS) executive who joined Extreme's board in 2004.

Extreme's run of disappointing earnings appears to be the catalyst for the decision to replace Stitt. For two quarters running, Extreme has missed expectations and reported problems in its North American business.

The most recent stumble began in early April, when Extreme noted its third-quarter revenues would be near $85 million, as opposed to the $90 million or more previously predicted by the company. Then, when formally reporting earnings in April, Extreme executives gave signs that the fourth quarter could be another slow one. (See Extreme Lowers Q3 Outlook and Extreme Slump Continues.)

Analysts like Extreme's technology, which includes the BlackDiamond 12K, a 10-Gbit/s Ethernet switch aimed at the hot carrier-Ethernet market. (See Extreme Joins Carrier Ethernet Chorus.)

But the company continues to have problems with its business, a situation compounded by apparent difficulties in retaining sales personnel.

"They don't have any momentum," said analyst John Mark Duncan of Pacific Growth Equities Inc. , shortly after Extreme's April earnings call. "Every time they plug a hole, another one comes up."

Extreme stock had fallen 5 cents (1%) to $4.50 on Friday; after the announcement, the stock remained flat in after-hours trading.

The stock is up 8 percent from its year-ago price of $4.17. But that year has included some jagged ups and downs; the price of $4.50 is 15 percent lower than the 52-week high of $5.30. — Craig Matsumoto, Senior Editor, Light Reading

Pete Baldwin 12/5/2012 | 3:53:56 AM
re: Stitt Gets Less Extreme Essay question : What ails Extreme, and how would you, as CEO, fix it? You don't get any godlike powers, sorry.

Alternatively, you can use this space to explain why you think Extreme is just fine.
Scott Raynovich 12/5/2012 | 3:53:55 AM
re: Stitt Gets Less Extreme At least the stock didn't rally when he quit, I always find those moments embarrassing.

Got to give Gordon credit, he was one of those rare founder/CEOs who actually stuck around post-bubble IPO and tried to make it work through the downturn. Maybe there's a lesson learned here: If you IPO'd in 1999, why stick around waiting for a better time? It ain't gonna happen.

metroman 12/5/2012 | 3:53:55 AM
re: Stitt Gets Less Extreme I think Extreme has hit it's ceiling. Consolidation in this space is gathering pace as the largest customers and operators put pricing pressure on vendors.

Only a certain subset of customers will buy switching technology from one vendor and routing from another. This may be a reason behind JNPR's ethernet switch development plans.

Extreme either need to diversify quickly or be aquired. To diversify they either need to be developing new product lines that are not ethernet switching or they need to be preparing aquisitions of their own.

Maybe Stitt just reached the limits of his startup skillset and is sensibly looking for a new CEO to take on the transition to a mature business.

Personally I think, that Extreme's branding does not help them. They are linked so closely to Ethernet switching, it makes it tough for them to become a diversified organisation. Bright Purple only appeals to some.

Metroman
twill009 12/5/2012 | 3:53:54 AM
re: Stitt Gets Less Extreme I agree that he deserves credit for sticking it out, and also for tacitly admitting that new leadership is needed now to move the company forward.

From the looks of it, Extreme is just a victim of a maturing product category (enterprise switching), and its internal product development seems to generate more of the same (albeit targeted at a different vertical market, carrier aggregation).

In that case, a new CEO should either 1)sell the company or 2) buy something in an adjacent market space. Since any attractive acquisition candidate is probably going to feel like they can do better than be acquired by a company whose stock at or near its 2006 low, option 2 is basically eliminated (unless anyone on this board has a good target suggestion.)

Potential buyers? I think the Junper idea is too stale, and they seem intent on developing L2 in house. Avaya is large enough (>$5 billion market cap) to pull it off, and the two companies already work together. Maybe F5, although i doubt that f5 management is good enough to integrate the two companies together. The list thins out pretty quickly after that.
paolo.franzoi 12/5/2012 | 3:53:54 AM
re: Stitt Gets Less Extreme
RP,

As somebody that neither works for or with Extreme....no I don't care.

seven
Honestly 12/5/2012 | 3:53:51 AM
re: Stitt Gets Less Extreme How many times have we seen a management change where the CEO, gets righfully taken out to become chairman, then a bit later goes away.? Several. They had a great run in the early days and Gordon was part of that when they IPO'd, but Stitt has seemingly refused to buy companies and see the future. No way they can successfully grow, or sell with him there and it is why I think he will totally go away sooner than later
Hanover_Fist 12/5/2012 | 3:46:10 AM
re: Stitt Gets Less Extreme Red Panda,
How can I get an icon picture like yours?

HF

p.s.,
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.
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