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Optical/IP

Extreme Keeps a Stiff Upper Lip

Ethernet switching specialist Extreme Networks Inc. (Nasdaq: EXTR) reported $112.1 million in revenue and a pro forma loss of $7.1 million, or seven cents per share, meeting the lowered forecasts for the company's third fiscal quarter, which ended March 31.

Despite the fact that the quarterly results represent a step back for Extreme -- the company reported pro forma results of $145 million and profit of $8 million in its last quarter -- company executives remained optimistic about turning a profit for 2001 and said they have yet to see any evidence of increased pricing pressure due to inventory gluts in the networking industry.

The $112 million in revenues represents a 67 percent increase over last year's third quarter but a sequential decrease of 23 percent over the second-quarter results. Company executives said that in order to return to profitability, Extreme continues to cut costs, including restructuring the company and laying off roughly 6 percent of the staff. The company took a $40 million charge for inventory write-down and an additional $5 million in charges for restructuring during the third quarter.

"We are taking the necessary steps to manage this downturn and will be well positioned when the economy recovers," said Extreme CEO Gordon Stitt.

Despite cutbacks, company executives remained optimistic about the remainder of the year, sticking to revenue estimates of $460 million or better for the calendar year of 2001, which would represent 20 percent growth over 2000 levels.

"Right now, bookings for the month of April are comfortably exceeding what we saw in January," said Vito Palermo, vice president and chief financial officer.

Today, Extreme stock rose 3.73 (20.70%) to 21.75 in a broad rally fueled by the Federal Reserve rate cut (see Rate Cut Supercharges LR Index). In after-hours trading on the Island ECN, Extreme shares were trading at 22.80, up 1.05 from Wednesday's closing levels.

Extreme executives appeared to surprise some analysts on the call by saying that First Call consensus analyst estimates of a loss of 10 cents per share for fiscal 2001 were "low" -- i.e., rather than losing that much money the company forsees a quick return to profitability.

"For the year, we should be profitable," said Palermo.

Analysts questioned Extreme executives about the potential of increased pricing pressure, especially in light of Cisco Systems Inc.'s (Nasdaq: CSCO) recent announcement that it will write off $2.5 billion in inventory, indicating there is a large glut of networking equipment on the market (see Cisco's Inventory Woes Mount). But Stitt downplayed such fear.

"Cisco has already been a very tough competitor in this marketplace; they are always very aggressive price-wise," said the CEO. "I didn't read anything in their comments that indicated change. They've always been a very tough competitor and they've used price to their advantage."

-- R. Scott Raynovich, Executive Editor, Light Reading http://www.lightreading.com
Hanover_Fist 12/4/2012 | 8:32:52 PM
re: Extreme Keeps a Stiff Upper Lip Although Extreme talks about not experiencing pricing pressures, they've often been involved in sales opportunities where the sales team has applied discounts of up to 70% off list.

They don't experience the pricing pressure because they are often the cause of the pricing problems encountered in the market.

Never blind them with brilliance when you can dazzle them with bullsh*t - and Extreme is the king of the hill when it comes to dazzling the financial markets.

Who else would would have the gall to market a proprietary 8 Gbps techonology as a "pre-10 Gig standard" as they did on their last conference call? (another bullsh*t statement).
Mordid 12/4/2012 | 8:32:43 PM
re: Extreme Keeps a Stiff Upper Lip Interesting post Hanover. If I look back at old posts from you, you had the same distaste for RiverStone. I take it you compete reguarly with Extreme and Riverstone? By the price comment, I take it you lose a lot to them on price?
Hanover_Fist 12/4/2012 | 8:32:41 PM
re: Extreme Keeps a Stiff Upper Lip Naw...just a pissed off technology person...

If you listen to their conference call, you'll here a number of Extreme exaggerations:

http://www.streetfusion.com/cu...

I'm just getting tired of LightReading's light analysis of what is going down in the industry.

LightReading - the National Enquirer of the Technology Industry...

LightReading - light on intelligence to make it an easy read...

LightReading - Light's on...nobody home...

LightReading - We'll get in your face because that's all we know how to do...
Steve Saunders 12/4/2012 | 8:32:40 PM
re: Extreme Keeps a Stiff Upper Lip hanover_fist,

Again, my response is the same: what are you doing here?

You claim to loathe LR, yet you read it religiously and are one of our most voracious message board users.

Doesn't make sense to me. You can leave whenever you like -- you won't be missed, obviously.

Steve

Scott Raynovich 12/4/2012 | 8:32:19 PM
re: Extreme Keeps a Stiff Upper Lip Hanover:

"You label the stories "News Analysis" but you do not analyse the information you receive - you simply regurgitate."

That's the first time anybody's accused us of that!
Hanover_Fist 12/4/2012 | 8:32:19 PM
re: Extreme Keeps a Stiff Upper Lip Scott,
It often appears that LightReading confuses "attitude" and "analysis."

Hanover_Fist
Hanover_Fist 12/4/2012 | 8:32:19 PM
re: Extreme Keeps a Stiff Upper Lip Steve,

Boo hoo hoo...someone's picking on LightReading...boo hoo hoo...

Isn't it about time that people started holding your feet to the fire for the lack of reporting substance and depth? You give the impression that you are on the cutting edge of news analysis but LightReading often falls short of the mark because you're more concerned that your editorial "Geraldo Rivera style of in your face" attitude takes precedence over editorial scrutiny or accuracy.

I'd like to puruse this website for insight, but the reporting often falls short or completely misses the mark - similar to the way that I scan your supermarket equal as I'm standing in line waiting to check out (yes, LightReading IS the National Enquirer of the technology industry, no bones about it) and no, I don't read either "religiously" as much as you'd want (or hope) to believe.

Based on the editorial direction given here, I'm expecting to read stories about BigFoot sightings on the Cisco campus here soon, too.

Come on. Question what the networking companies spoon feed you. Have your people look deeper in to the issues. You label the stories "News Analysis" but you do not analyse the information you receive - you simply regurgitate.

Ah, but what's the use...





Scott Raynovich 12/4/2012 | 8:32:18 PM
re: Extreme Keeps a Stiff Upper Lip sure. right.
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