Extreme treads water

Extreme Networks this week finds itself with wounded revenues, an interim CEO, and doubts about its future.

The company reported revenues of $66.3 million for its most recent quarter. That isn’t much of a shock, but it was when Extreme gave everyone a heads-up on the shortfall earlier this month. Analysts had been expecting revenues in the neighborhood of $80 million. And last year, Extreme had cleared $89.5 million in the same time period. 

As Extreme noted earlier this month, the company found its supply chain “constrained,” so it wasn’t able to deliver products. Deals were lost or postponed.

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Extreme Networks this week finds itself with wounded revenues, an interim CEO, and doubts about its future.

The company reported revenues of $66.3 million for its most recent quarter. That isn’t much of a shock, but it was when Extreme gave everyone a heads-up on the shortfall earlier this month. Analysts had been expecting revenues in the neighborhood of $80 million. And last year, Extreme had cleared $89.5 million in the same time period. 

As Extreme noted earlier this month, the company found its supply chain “constrained,” so it wasn’t able to deliver products. Deals were lost or postponed.

Ahead of this week’s earnings report, Extreme dismissed CEO Mark Canepa and about 70 other employees, making up 9% of the company’s workforce. Extreme said the move lowered its quarterly breakeven point to less than $70 million in revenue; in the most recent quarter, it lost $5.5 million on that $66.3 million in sales.

Right now, the company clearly just needs to keep its head above water. But really, that’s what Extreme has been doing for about six years. Revenue has remained about the same during that stretch. The salad days for Extreme were in 2000 and 2001, when the company took in nearly $500 million in a 12-month time period.

Extreme is the last of the mid-1990s start-ups fueled by the Gigabit Ethernet standard. All of the others have exited in one way or another, mainly via acquisition by larger companies.

Foundry Networks was the last one to be acquired, as it was snapped up by Brocade last year (which is itself now looking for a buyer, according to reports). Foundry was in a much better place than Extreme was then or is now. I compared the two in February 2008, and there was a distinct difference in how the two were tracking. 

The real question now is, what is Extreme is treading water for? Can it still hope to be acquired, and is that its only hope?

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