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
|* = 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