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Optical/IP

Extreme Beats Estimates, Sees Uptick

Extreme Networks Inc. (Nasdaq: EXTR) has posted first quarter 2005 revenues of $95.1 million, up nine percent from the same quarter last year and slightly above analyst expectations of $94.62 million (see Extreme Reports Q1 Profit).

Net income was $4.1 million, up from $2.6 million a year earlier. Earnings per share were 3 cents, again beating analyst estimates of 2 cents.

Extreme’s CEO Gordon Stitt was upbeat about the results and the outlook for the market, and spent much of yesterday’s earnings call talking about how the networking market is getting back on its feet.

”We believe that the climate is getting gradually better -- there are strong upgrade cycles in enterprise and metro Ethernet,” he said.

The company’s Summit 200 and 400 edge devices had been performing well, said the CEO, and revenues from the BlackDiamond 10-Gbit/s switch were up sequentially in the first quarter.

But CFO Bill Slakey painted a more cautious picture, warning that “one or two big deals” could still significantly affect quarterly results.

Slakey anticipates that revenues in the second quarter will be up only slightly, between one and five percent, or between $96.1 million and $99.9 million, quarter on quarter. That compares with average analyst expectations of $99.6 million.

The market responded negatively to the results package, with Extreme's share price dipping by 11 cents, just over two percent, to $5.20 in after hours trading.

Stitt also gave a hint of what to expect from Extreme’s partnership with Avaya Inc. (NYSE: AV). Last year the two vendors teamed up on a multimillion-dollar marketing alliance to sell VOIP gear to enterprises, and the first products are now on the horizon (see Avaya & Extreme Team on VOIP).

”It's a [software] technology that will be implemented across all our products. There will also be some converged management tools,” Stitt said. He added that these products are likely to be delivered early in 2005.

But, with partnerships so crucial to Extreme, Stitt found himself fielding some awkward questions about the company’s ongoing relationship with Siemens AG (NYSE: SI; Frankfurt: SIE). Despite the companies’ long-standing VOIP partnership, Siemens has recently cosied up to Huawei Technologies Co. Ltd. (see Siemens, Huawei Team Up).

If Stitt was hurting, he didn’t show it. “We have an excellent partnership with Siemens,” he said. “We continue to value that relationship and don’t anticipate any material changes there.”

— James Rogers, Site Editor, Next-gen Data Center Forum

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