Optical/IP Networks

Extreme, Foundry Get Happy

NEW YORK -- The mood of the Ethernet switching vendors appears to be picking up a bit, according to presentations from two major vendors here at the CIBC World Markets Communications Conference.

Officials from Extreme Networks Inc. (Nasdaq: EXTR) and Foundry Networks Inc. (Nasdaq: FDRY) both described their businesses as returning to more stable, predictable growth, and indicated that the enterprise market is likely to rebound long before the telecom sector.

For example, Extreme CFO Vito Palermo described the quarter as "linear and consistent... That's different from last quarter. It's the best linearity we've seen in a year." He said that enterpise customers have returned to predictable buying patterns and "at least they pay their bills," unlike next-generation service providers.

Palermo also said he has seen no evidence of pricing pressure in the gigabit Ethernet market. Because of a glut of inventory on the market, many experts had been afraid of decreasing prices for Ethernet equipment, which would decrease profit margins.

"I understand there are concerns about inventory, but we haven't seen a dramatic or substantial price impact this quarter so far," said Palermo.

Extreme stock started moving shortly before the presentation, which was at 1:30 PM ET. By late afternoon, shares were up 3.23 (10.78%) at 33.20.

Officials from Extreme competitor Foundry seconded Extreme's optimism.

"This quarter will be more linear than last quarter. That lends itself to a better business model," said Michael Iburg, treasurer of Foundry.

In late afternoon trading, Foundry stock was up 2.53 (14.19%) to 20.36.

— R. Scott Raynovich, Executive Editor, Light Reading

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