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Extreme Networks Inc. Reports Operating Results (10-Q)

April 30, 2010 | About:
10qk

10qk

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Extreme Networks Inc. (EXTR) filed Quarterly Report for the period ended 2010-03-28.

Extreme Networks Inc. has a market cap of $320.6 million; its shares were traded at around $3.58 with and P/S ratio of 0.9. EXTR is in the portfolios of George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

We develop and sell network infrastructure equipment and offer related services contracts for extended warranty and maintenance to our enterprise, data center and metropolitan telecommunications service provider customers. Substantially all of our revenue is derived from the sale of our networking equipment and related service contracts. In the three months ended March 28, 2010, our revenue increased $1.0 million, gross profit increased $1.0 million, operating profit increased $5.8 million and net income increased $5.8 million as compared to the three months ended March 29, 2009. In the nine months ended March 28, 2010, our revenue decreased $30.4 million, gross profit decreased $16.7 million, operating loss increased $3.4 million and net loss increased $5.1 million as compared to the nine months ended March 29, 2009.

In the third quarter of fiscal 2010, EMEA revenue was $31.1 million, a decrease of $7.4 million, or 19%, from the third quarter of fiscal 2009. Product revenue decreased $7.5 million or 22% and service revenue increased $0.1 million or 3% compared to a year ago quarter. In the first nine months of fiscal 2010, EMEA revenue was $97.0 million which represented a decrease of $25.3 million or 21% from the first nine months of fiscal 2009. Product revenue decreased $25.9 million or 24% and service revenue increased $0.7 million or 5% from the first nine months of fiscal 2009. The decrease in EMEA revenue compared to the third quarter of fiscal 2009 and the first nine months of fiscal 2009 was primarily due to a weaker European economy and lower sales of our metro chassis product family to service provider customers primarily in Eastern Europe.

In the third quarter of fiscal 2010, APAC revenue was $14.6 million, an increase of $2.8 million or 23% from the third quarter of fiscal 2009. Product revenue increased $2.5 million or 24% and service revenue increased $0.3 million or 22% compared to a year ago quarter. In the first nine months of fiscal 2010, APAC revenue was $40.0 million which represented an increase of $4.0 million or 11% from the first nine months of fiscal 2009. Product revenue increased $4.3 million or 14% and service revenue decreased $0.3 million or 7%. The increase in APAC revenue compared to the third quarter of fiscal 2009 and the first nine months of fiscal 2009 was primarily due to increased sales in Japan and China.

Product gross profit for the first nine months of fiscal 2010 was $100.8 million, a decrease of $20.5 million or 17% from $121.3 million in the first nine months of fiscal 2009. As a percentage of revenue, product gross margin decreased one and a half percentage points. The decrease in product gross profit was primarily driven by $17.7 million decrease in sales volume driven by supply chain constraints in the first quarter of fiscal 2010 and $3.9 million decrease due to mix and competition, offset by $1.1 million recovery of warranty expense incurred in the prior period from our outside design manufacturer.

Sales and marketing expenses decreased to $70.8 million for the first nine months of fiscal 2010 from $75.9 million for the first nine months of fiscal 2009, a decrease of $5.1 million or 7%. The decrease was primarily due to lower salary and benefits of $1.9 million due to lower headcount, $1.0 million of lower commission expense due to lower sales volume, $0.9 million of favorable foreign exchange impact, lower occupancy cost of $0.5 million due to consolidation of sales offices worldwide and lower general sales and marketing expense of $0.8 million.

General and administrative expenses consist primarily of salaries and related expenses for executive, finance and administrative personnel, legal fees, professional fees and other general corporate expenses. General and administrative expenses decreased to $6.1 million for the third quarter of fiscal 2010 from $7.0 million for the third quarter of fiscal 2009, a decrease of $0.9 million, or 12%. This decrease was primarily due to lower salary and benefits of $0.7 million due to lower headcount and $0.7 million of lower professional fees in litigation and financial consulting, offset by $0.4 million increase in share based compensation and general expenses.

Read the The complete Report

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