Extreme Networks improves margins, quarterly sales fall short

Extreme Networks reported revenue for its fiscal second quarter to December of USD 231.1 million, up 48 percent from a year earlier thanks to its takeovers of assets from Avaya and Brocade. The gross margin improved 490 basis points year-on-year to 55.8 percent, while the adjusted operating margin fell to 8.8 percent from 11.7. 

Extreme Networks recorded a net loss for the quarter of USD 31.9 million or USD 0.28 per share, better than its forecast. Revenues were slightly below forecast, but CEO Ed Meyercord said the group turned away a "significant volume" of low-margin business in order to maintain its gross margin, which is nearing the company target of 60 percent. The margin is expected to improve further in the fiscal second half. 

Meyercord said the group completed the migration of the data and IT systems of the acquired assets from Brocade into Extreme as planned on 15 January, the company is on track to migrate the data and systems of the Avaya assets in early April. 

For fiscal Q3, Extreme Networks forecast revenue of USD 262-272 million and a gross margin of 56.1-58.4 percent. The net loss is estimated at USD 1.6-10.4 million or USD 0.01-0.09 per share.