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Extreme Networks Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 2, 2011 06:14AM

Extreme Networks Inc. (EXTR) filed Quarterly Report for the period ended 2011-03-27. Extreme Networks Inc. has a market cap of $286.22 million; its shares were traded at around $3.13 with a P/E ratio of 26.08 and P/S ratio of 0.93.



Highlight of Business Operations:

We develop and sell network infrastructure equipment and offer related services to our enterprise, data center and telecommunications service provider customers. Substantially all of our revenue is derived from the sale of our networking equipment and related service contracts. In the third quarter of fiscal 2011, our revenues decreased $2.5 million, gross profit decreased $8.8 million, operating profit decreased $9.6 million and net loss increased $10.5 million as compared to the third quarter of fiscal 2010.

In the first nine months of fiscal 2011, our revenues increased $20.8 million, gross profit increased $3.5 million, operating profit increased $9.2 million and net income increased $8.0 million as compared to the first nine months of fiscal 2010.

Sales and marketing expenses increased in the first nine months of fiscal 2011 as compared to the first nine months of fiscal 2010, primarily due to an increase of $2.0 million in salaries and benefits, a $1.9 million increase in commissions as a result of increased revenues and accelerators, and a $1.1 million increase in travel expenses, offset by a $0.6 million decrease in contract labor expense.

On October 20, 2010, we settled a lawsuit related to certain real property leases it entered into in June 2000. Total settlement award was $5.0 million, of which $3.8 million was paid in the second quarter of fiscal 2011, and $0.3 million was paid in the third quarter of fiscal 2011. The remaining amount will be paid over the next seven months.

On April 8 2011, we filed a Stipulation of Settlement in the consolidated shareholder derivative actions entitled In re Extreme Networks, Inc., Shareholder Derivative Litigation. As part of the settlement, and if the settlement is ultimately accepted by the Court, we have agreed to pay the plaintiff's counsel for their service in the action in the amount of $3.5 million, of which $2.7 million will be reimbursed to us by our directors and officer insurer. We recorded a $3.5 million payable and $2.7 million receivable on the balance sheet in the second quarter of fiscal 2011. In addition, we recorded a net expense of $0.8 million in the Condensed Consolidated Statement of Operations for the nine months ended March 27, 2011 under Litigation Settlement.

We recorded an income tax provision of $0.4 million and an income tax benefit of $0.2 million for the three months ended March 27, 2011 and March 28, 2010, respectively. We recorded an income tax provision of $0.8 million and an income tax benefit of $42,000 for the nine months ended March 27, 2011 and March 29, 2010, respectively. The income tax provision for the three months ended March 27, 2011 consisted primarily of taxes on foreign income and U.S. state income taxes, and the income tax benefit for the three months ended March 28, 2010 consisted primarily of taxes on foreign income, state income tax and the U.S. Federal alternative minimum tax, offset by a reduction of a foreign tax reserve. The income provision for the nine months ended March 27, 2011 consisted primarily of taxes on foreign income and U.S. state income taxes, and the income tax benefit for the nine months ended March 28, 2010 consisted primarily of taxes on foreign income, state income tax and the U.S. Federal alternative minimum tax, offset by a reduction of a foreign tax reserve. The income tax provisions for both fiscal years were calculated based on the results of operations for the three and nine months ended March 27, 2011 and March 28, 2010, and may not reflect the annual effective rate. Since we have net operating loss carry forwards to offset U.S. taxable income, we are not using an annual effective tax rate to apply to the taxable income for the quarter or year to date.

Read the The complete Report



Stocks Discussed: EXTR,
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