Cisco rival Extreme exiting network stage?

Lackluster quarter, CEO exit and 9% layoff begs the question

Extreme Networks last week bid adieu to its CEO and 9% of its workforce -- or about 70 people -- before announcing today that its first quarter fell far short of expectations. It begs the question of whether Extreme, with a flat 1.5% revenue share of the $19 billion Ethernet switching market for the past two years, can continue to survive at this pace.

"This is a company that's truly having a hard time finding its way," says Yankee Group analyst Zeus Kerravala in this story by colleague Tim Greene. "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? 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."

For its first quarter, Extreme recorded net revenue of $66.3 million, compared to $89.5 million in the fiscal first quarter of 2009. The company's non-GAAP -- excluding expenses, charges and other items -- net loss was $4.9 million, compared to non-GAAP net income of $2.0 million in the year-ago quarter.

Revenue dipped markedly in all geographic regions. For North America it was down 25%. In EMEA, it was off 33% and in APAC is was down 7%.

Acting CEO and CFO Bob Corey said last week's restructuring was necessary to lower Extreme's quarterly breakeven to less than $70 million in revenue and reduce quarterly operating expenses by approximately $2.5 million.

"As previously announced, our supply chain was constrained during Q1 impacting our ability to deliver product," Corey said in a statement on Extreme's Q1 results. "We are disappointed with our performance in Q1 and are actively improving availability from our Supply Chain to meet Customer demand for our products in Q2. We remain committed to our products, markets, channels and customers."

How long will customers remain committed to Extreme?

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