Extreme Tightens Belt in Bid to Endure

After warning that it wouldn’t meet expectations for its fiscal first quarter, Extreme Networks didn’t offer any surprises when it reported its financial results yesterday.

With an interim CEO and 70 fewer employees than it had a week ago, Extreme will attempt to restructure so that it can break even on revenue of about $70 million in future quarters.

Network World’s Tim Greene reported that, as part of the restructuring, the company also eliminated the job of chief counsel, getting rid of Robert Schlossman and replacing him with Vice President Diane Honda. After reviewing the company’s website, Greene deduced that Extreme’s head of human resources and head software developer also have departed the company.

In its second fiscal quarter, Extreme expects revenue between $76 and $78 million. On average, analysts are expecting the company to report revenue of $75 million, according to estimates from Reuters. We’ll see whether Extreme can hit the numbers.

The company said it fell short of its targets in the first quarter because of supply-chain issues, but market watchers say Extreme suffered at least as much from its own poor execution as well as from intensifying competition.

Skepticism regarding the company is strong. Many analysts and investors think Extreme is battening down the hatches and just trying to survive until it can find a buyer.

Said Zeus Kerravala, Yankee Group analyst:

“They’re in a tough spot. This is a company that’s truly having a hard time finding its way. . . .

When you look at all the network vendors out there, what problem is it that Extreme is trying to solve that isn’t being solved by somebody else? If you look at data centers, all the emphasis is on converged fabric, and they just don’t have a roadmap to get there. I think they’ll go the route of Enterasys. They’ll get smaller and smaller and continue to exist off their installed base until their assets get acquired by somebody else.”

That increasingly seems to be Extreme’s ultimate fate.


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