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Optical/IP

Extreme Expects Revenue Dip

Extreme Networks Inc. (Nasdaq: EXTR) will disappoint attendees at its investors and analysts day in New York today with its expectations for the current quarter that ends December 29 (see Extreme Expects Lower Revenues).

The news sent the vendor's share price into freefall: by 9:49 a.m. Eastern time the stock had sunk by $1.34, or 16 percent, to $6.85 from yesterday's close of $8.19. The Ethernet equipment vendor expects revenues to fall sequentially to between $80 million and $85 million (see table below), down from the $87.4 million posted in the first quarter (see Extreme Surprise), and down from the $90.2 million in the second quarter a year earlier. Analysts had been expecting revenues of more than $90 million. "Product constraints" are being blamed for the fall in revenues.

Table 1: Extreme's Revenue History
Q2 Estimate
to 12/29/03
Q1
to 9/28
Q4
to 6/29
Q3
to 3/30
Q2
to 12/29/02
Revenue $80M-$85M $87.4M $87.3M $85.2M $90.20
Gross Profit NA $44.9M $17.3M $38.7M $45.3M
Operating Income NA $1.2M ($12M) ($12.7M) ($33.9M)
Net Income ($3.5M-$6.5M)* $2.6M ($165.1M) ($7.6M) ($19.7M)
* = before amortization of warrants recently granted to Avaya, which has not yet been determined
Source: Company data




This is going to make it very difficult for Extreme to achieve the $400 million that CEO Gordon Stitt had predicted for the financial year 2004: Even if Extreme makes the top end of its range for this quarter, it will leave the vendor needing $227.6 million in the second half of the fiscal year.

To add to the disappointment, Extreme is set to make a net loss for the second quarter, having pushed itself into the black in the previous quarter. The vendor expects a net loss of up to $6.5 million, or 6 cents per share.

Investors may have got wind of the news yesterday, as the share price fell by 54 cents, or 6.2 percent, to $8.19, valuing the company at $960 million. Extreme's 52-week high is $10.46, which it reached at the beginning of this month, and a year's low of $3.05, a nadir achieved in January.

However, the company expects its third quarter to show a sequential increase in revenues, due to an increase in orders and what Extreme describes as "strong early customer response" to its BlackDiamond 10 GigE switch, announced last week (see Extreme Touts BlackDiamond 10K).

— Ray Le Maistre, International Editor, Boardwatch

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ironccie 12/4/2012 | 11:10:22 PM
re: Extreme Expects Revenue Dip Given power supplies blowing up in data centers, poor product quality, telcos banning Extreme from low quality experiences, and the brain drain to Cisco/Foundry, I'm not suprised. I wonder how many days until Chris Todd is told to go back to Cisco (The Cisco Stragegy belongs to Cisco, not Chris Todd).

Business is business. Extreme customers will continue to pay the price long after they buy Extreme. FACT. Extreme started in the same year as Founry and has HALF the customers... Hmmmm... If they are hundreds of millions of dollars in the hole, it is obvious that they expect their customers to pay that debt. How can Extreme continue on without making profits? I for one, am not going to wait around to find out. They can take their no cut-and-paste 15 printed pages default config and wonder why the Cisco faithful hate their guts... Talking to former Extreme employees, they say their biggest disappointment was the poor quality, the SRAM problems, the power supply problems, the warping backplanes, the glaring purple headache, and having a poorly managed company from the top down (FACT: They are 100's of millions of dollars behind their competitors that started in the same year). Enter Dell and GbE...

Foundry/Cisco is all I need to buld a network that makes real money. Which I did. And now I enjoy the money (vacation in Malaysia was grea!). Wonder how the Extreme folks feel... It would be great if Juniper learned from Extremes mistakes and made this a 3 horse race, but unfortunately, Juniper listens to itself and not to the customers (how many customers requested an infranet to bail themselves out of 1 Billion dollars debt?)

Don't even know why I type this. I feel just knowing this myself is more valuable and the Juniper/Procket crew will just baste me in how only they know IP routing and nobody else does... Foundry/Cisco know profits. Nobody else does... Bye, bye Extreme. You are/were the worst company in the history of computer networking. It was NOT nice knowing you. HOPEFULLY, someone will step in as the number 3 company and show they know how to make a penny. This will benefit the consumer. Juniper? Maybe... They claim they are number two, but the Foundry guys live in nicer houses and drive nicer cars. They are 1 Billion dollars ahead and Juniper has got to roll up their sleeves... OR die and wait for a business to arrive that knows technology. Repinuj Networks is a good name????

IronCCIE
signmeup 12/4/2012 | 11:10:22 PM
re: Extreme Expects Revenue Dip I don't know why I even bothered to read your post.. (or why I continue to read them).

I bet you enjoy taping yourself, just so you can play it back again and laugh at all of the 'witty' cracks you make up.

Iipoed 12/4/2012 | 11:10:21 PM
re: Extreme Expects Revenue Dip I Know Extreme, Foundry and Cisco extremely well from the the very early days and I can make this point. Cisco was an engineering driven company for the first 5 years of their existence. Foundry has never not been an engineering company (nobody can accuse Bobby Johnson of being a marketing guy).
Unfortunately Extreme has been a 100% marketing driven company from day one. Their sales tactics were exactly like Cisco's (after cisco had been in business for 10 years). That is to negative sell, pre-announce products 6 months to a year before shipping and following the old Ascend mentality, go straight from Alpha testing, skipping beta testing, to market.
The good people bailed long ago from Extreme. I do hope they survive and maybe merge with Juniper as this industry does not need anymore unemployed people.
fw23 12/4/2012 | 11:10:20 PM
re: Extreme Expects Revenue Dip Many of these comments are unfair. Extreme is
a company thats 100% committed to delivering
products to customers no matter what gets in
the way. They take care of customers rather
than blue-sky about things customers dont
care about. They don't want to be Ferrari
or BMW, they want to be the Honda of ethernet
switches. And blue diamond has the potential
to be the Honda accord of the ethernet world.

I would discount any rumors about Juniper.
There is no way that the diamond(s) would
fit into their portfolio. They would not
know how to go about selling anyway. They
want to build wedding cakes rather than
deliver donuts to the masses.

The top people at extreme know how to cut
through the static and get a product //OUT THE
DOOR//. So stop the ridicule. Things will
get better. This is just one bad day.

Iipoed 12/4/2012 | 11:10:18 PM
re: Extreme Expects Revenue Dip FW23, its the black diamond. As to honda accord similarity more like Yugo.

As to Juniper, they both would benefit, Extreme has no carrier product and Juniper has no L2 product. Some of the same VCs involved with both companies. No negatives to them merging I can see only potential for increased customer penetration business (one stop shop type sales approach).

change_is_good 12/4/2012 | 11:10:18 PM
re: Extreme Expects Revenue Dip fw23, all your base are belong to juniper.
fw23 12/4/2012 | 11:10:17 PM
re: Extreme Expects Revenue Dip change_is_good,

Ask your boss at Juniper to assign you to
a new job. I don't think stalking people
who say the truth about Juniper is going
to lead to a positive result. It will work
about as well as those hate-speach drawings
did.

If you want to help Juniper, start a groundswell
for that superbowl ad. its getting close, but
there is still time to get some media
exposure and get some more people in potential
customers aware of juniper's existance.

As HEAVY READING pointed out, the problem is
marketing and customer awareness for Juniper,
not guys on speaker's corner telling the
world their view from the peanut gallery.

capolite 12/4/2012 | 11:10:11 PM
re: Extreme Expects Revenue Dip Extreme has been a bottom feeder selling low quality, me-too products at absurd prices. They aren't strategic - they're just a commodity. Chris and Spili are good guys but someone has to take the fall.
BobbyMax 12/4/2012 | 11:10:09 PM
re: Extreme Expects Revenue Dip From the very beginning Extreme was focusing on CLECs. This was a wrong strategy for the company to follow. For a long time Extreme thoght it could survive on business like YIPEs and companies like it. Unfortunately it did not work out very well for Extremes.
Iipoed 12/4/2012 | 11:10:07 PM
re: Extreme Expects Revenue Dip BM-once again you have no idea what your are talking about. Extreme's sales direction was to push as much through channels as possible. Yipes was a large customer but the majority of Extreme's business was 48 port stackables in the first few years, certainly not a clec product.

You really have no idea what is going on in this industry, research it first before you continue to post your nonsense.
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