Extreme Networks Announces Third Quarter Results

Revenues Increase 67 Percent Annually; Q3 Pro Forma Net Loss of $(0.07)

Per Share



Apr 18, 2001, 01:00 ET from Extreme Networks, Inc.

    SANTA CLARA, Calif., April 18 /PRNewswire/ --
 Extreme Networks, Inc., (Nasdaq:   EXTR), a leader in broadband networking
 solutions, today announced financial results for its third fiscal quarter
 ended March 31, 2001.  Revenue for the third quarter of fiscal 2001 increased
 to $112.1 million, compared to $67.3 million in the third quarter of fiscal
 2000 -- a 67 percent increase annually. Pro forma net loss per share was
 $(0.07) on a diluted basis.
     Net income, including the impact of amortization of goodwill and
 intangibles, for the third quarter of fiscal 2001, was $(70.1) million, or
 $(0.64) per share, compared with third quarter fiscal 2000 net income of
 $9.1 million, or $0.08 per share, and net income of $8.1 million, or $0.07 per
 share, in the second quarter of fiscal 2001. All per-share amounts are
 computed on a diluted basis.
     Consistent with its April 5, 2001 pre-announcement, Extreme Networks' pro
 forma net income, which excludes the effects of the amortization of goodwill
 and intangibles, restructuring charges, one-time charges associated with
 inventory write-offs, and asset impairments for the third quarter of fiscal
 2001, was $(7.1) million, or $(0.07) per share, compared with third quarter of
 fiscal 2000 net income of $9.0 million, or $0.08 per share. All per-share
 amounts are computed on a diluted basis.
     "The continuation of this current economic slowdown has forced companies
 to re-evaluate their short-term purchase decisions," said Gordon Stitt, CEO,
 Extreme Networks, Inc. "During this period, Extreme Networks will continue to
 emphasize its long-term strategy and build upon its core values. Extreme
 Networks' strength is that our solutions simplify corporate networks and help
 companies achieve greater ROI. Rarely have these two concepts been more
 important in the global marketplace than today. By this standard, we remain
 optimistic long-term and believe that key decisions made during the last
 quarter such as our successful acquisitions of Optranet and Webstacks and our
 customer wins with Telia of Sweden and Wind Aziende of Italy will help further
 entrench Extreme Networks into broadband networking."
 
     About Extreme Networks
     Extreme Networks, Inc. delivers a simplified approach for building
 networks based on its corporate vision of Ethernet Everywhere(TM) networks.
 The Company's family of BlackDiamond(R), Alpine(TM), and Summit(R) switching
 solutions incorporate a unique combination of ExtremeWare(R) management
 software and an ASIC-based common architecture to provide Global 2000
 enterprises, telecommunications companies, Internet Service Providers and
 content providers with the ability to increase the flow of information and
 accommodate future network growth.
     Headquartered in Santa Clara, Calif., Extreme Networks was listed as the
 "Fastest Growing Company in Silicon Valley" based on three-year revenue growth
 by the San Jose and Silicon Valley Business Journal. For more information,
 visit www.extremenetworks.com.
 
     NOTE:  Extreme Networks, ExtremeWare, BlackDiamond and Summit are
 registered trademarks of Extreme Networks, Inc., and Alpine and Ethernet
 Everywhere are trademarks of Extreme Networks, Inc., in the United States and
 other countries.
     This announcement contains forward-looking statements that involve risks
 and uncertainties. Actual results could differ materially from those projected
 in the forward-looking statements as a result of certain risk factors,
 including, but not limited to:  (i) our limited history of profitability; (ii)
 possible delays in the development of new technology and products; (iii) the
 ability to procure components for products from single or limited sources;
 (iv) a dependence on third-party manufacturers, (v) a highly competitive
 business environment for network switching equipment; (vi) a reliance upon
 third-party distribution channels to sell products; (vii) fluctuations in
 demand for our products and services; and (viii) economic trends in worldwide
 geographic markets. More information about potential factors that could affect
 our business and financial results is included in our Annual Report on Form
 10-K for the year ended June 30, 2000, and the Quarterly Report on Form 10-Q
 for the period ended December 31, 2000, including (without limitation) under
 the captions, "Management's Discussion and Analysis of Financial Condition and
 Results of Operations," and "Risk Factors," which are on file with the
 Securities and Exchange Commission
 ( http://www.sec.gov ).
 
 
                             EXTREME NETWORKS, INC.
 
           PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per-share amounts)
                                  (Unaudited)
 
                                       Three Months Ended  Nine Months Ended
                                      March 31, March 31, March 31, March 31,
                                          2001      2000      2001      2000
 
     Net revenues                       $112,106   $67,310  $376,163 $169,534
 
     Cost of revenues                     57,534    31,971   185,398   80,748
     Gross profit                         54,572    35,339   190,765   88,786
 
     Operating expenses:
       Research and development           16,497     8,102    41,193   22,781
       Sales and marketing                41,578    14,798   117,192   38,180
       General and administrative         10,284     2,906    19,442    8,204
         Total operating expenses         68,359    25,806   177,827   69,165
 
     Operating income(loss)             (13,787)     9,533    12,938   19,621
     Interest and other income, net        2,864     4,401     9,378    9,841
 
 
     Income(loss) before income taxes   (10,923)    13,934    22,316   29,462
     Provision(benefit) for
      income taxes                       (3,823)     4,877     7,782   10,003
 
 
     Net income (loss)                  $(7,100)    $9,057   $14,534  $19,459
 
     Net income(loss) per share:
      Basic                              $(0.07)     $0.09     $0.13    $0.20
      Diluted                            $(0.07)     $0.08     $0.12    $0.18
 
     Shares used in computing
      per share calculation:
      Basic                              109,028   103,060   114,804   99,158
      Diluted                            109,028   113,584   118,091  110,654
 
     This statement of operations information for the three and nine month
 periods ended March 31, 2001 and 2000 is for illustrative purposes only and is
 not prepared in accordance with generally accepted accounting principles as it
 excludes the effects of the following (in thousands):
 
     During the three months ended March 31, 2001, certain inventory charges
      included in cost of revenues of $40,330.
     During the three months ended March 31, 2001, in-process research and
      development of $30,142, which resulted from the acquisitions of
      Optranet, Inc. and WebStacks, Inc.
     During the three months and nine months ended March 31, 2001, goodwill,
      purchased intangibles and deferred stock compensation of $8,239 and
      $22,101 respectively.
     During the three months ended March 31, 2001, restructuring and one-time
      charges of $5,737.
 
     Share and per share data have been restated to give retroactive effect to
     a two-for-one stock split in the form of a stock dividend effected in
     August 2000.
 
 
                             EXTREME NETWORKS, INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per-share amounts)
                                  (Unaudited)
 
                                       Three Months Ended   Nine Months Ended
                                      March 31, March 31,March 31, March 31,
                                          2001      2000      2001     2000
 
     Net revenues                      $112,106   $67,310  $376,163 $169,534
 
     Cost of revenues                    97,864    31,971   225,728   80,748
     Gross profit                        14,242    35,339   150,435   88,786
 
     Operating expenses:
       Research and development          16,642     8,102    41,338   22,781
       Sales and marketing               44,756    14,798   120,370   38,180
       General and administrative        11,839     2,906    20,997    8,204
       Goodwill, purchased intangibles
        and deferred stock compensation   8,239        --    22,101       --
       In-process research and
        development                      30,142        --    30,142       --
         Total operating expenses       111,618    25,806   234,948   69,165
 
     Operating income(loss)            (97,376)     9,533  (84,513)   19,621
 
     Interest and other income, net       2,005     4,401     8,519    9,841
 
     Income(loss) before income taxes  (95,371)    13,934  (75,994)   29,462
 
     Provision(benefit) for income
      taxes                            (25,256)     4,877  (18,474)   10,003
 
 
     Net income(loss)                 $(70,115)    $9,057 $(57,520)  $19,459
 
     Net income(loss) per share:
      Basic                             $(0.64)     $0.09   $(0.50)    $0.20
      Diluted                           $(0.64)     $0.08   $(0.50)    $0.18
 
     Shares used in computing per
      share calculation:
      Basic                             109,028   103,060   114,804   99,158
      Diluted                           109,028   113,584   114,804  110,654
 
     Share and per share data have been restated to give retroactive effect to
     a two-for-one stock split in the form of a stock dividend effected in
     August 2000.
 
 
                             EXTREME NETWORKS, INC.
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
 
                                                    March 31,       June 30,
                                                      2001           2000
                                                  (Unaudited)         (A)
                                      Assets
      Current assets:
       Cash, cash equivalents and investments        $145,428       $183,361
       Accounts receivable, net                        88,913         60,996
       Inventories, net                                63,186         23,801
       Deferred tax assets                             22,424         13,800
       Other current assets                            20,619         20,526
      Total current assets                            340,570        302,484
 
      Property and equipment, net                      52,258         26,750
      Long-term marketable securities                 103,936        124,144
      Goodwill and intangibles                        125,910         49,782
      Other long-term assets                           43,861         12,770
 
     Total assets                                    $666,535       $515,930
 
                    Liabilities and stockholders' equity
      Current liabilities:
       Accounts payable                               $37,731        $39,023
       Deferred revenue                                46,328         22,042
       Accrued liabilities                             47,818         35,538
      Total current liabilities                       131,877         96,603
 
      Long term deposit                                   266            306
 
      Total stockholders' equity                      534,392        419,021
 
     Total liabilities and stockholders' equity      $666,535       $515,930
 
     (A) Derived from audited financial statements at June 30, 2000
 
 

SOURCE Extreme Networks, Inc.
    SANTA CLARA, Calif., April 18 /PRNewswire/ --
 Extreme Networks, Inc., (Nasdaq:   EXTR), a leader in broadband networking
 solutions, today announced financial results for its third fiscal quarter
 ended March 31, 2001.  Revenue for the third quarter of fiscal 2001 increased
 to $112.1 million, compared to $67.3 million in the third quarter of fiscal
 2000 -- a 67 percent increase annually. Pro forma net loss per share was
 $(0.07) on a diluted basis.
     Net income, including the impact of amortization of goodwill and
 intangibles, for the third quarter of fiscal 2001, was $(70.1) million, or
 $(0.64) per share, compared with third quarter fiscal 2000 net income of
 $9.1 million, or $0.08 per share, and net income of $8.1 million, or $0.07 per
 share, in the second quarter of fiscal 2001. All per-share amounts are
 computed on a diluted basis.
     Consistent with its April 5, 2001 pre-announcement, Extreme Networks' pro
 forma net income, which excludes the effects of the amortization of goodwill
 and intangibles, restructuring charges, one-time charges associated with
 inventory write-offs, and asset impairments for the third quarter of fiscal
 2001, was $(7.1) million, or $(0.07) per share, compared with third quarter of
 fiscal 2000 net income of $9.0 million, or $0.08 per share. All per-share
 amounts are computed on a diluted basis.
     "The continuation of this current economic slowdown has forced companies
 to re-evaluate their short-term purchase decisions," said Gordon Stitt, CEO,
 Extreme Networks, Inc. "During this period, Extreme Networks will continue to
 emphasize its long-term strategy and build upon its core values. Extreme
 Networks' strength is that our solutions simplify corporate networks and help
 companies achieve greater ROI. Rarely have these two concepts been more
 important in the global marketplace than today. By this standard, we remain
 optimistic long-term and believe that key decisions made during the last
 quarter such as our successful acquisitions of Optranet and Webstacks and our
 customer wins with Telia of Sweden and Wind Aziende of Italy will help further
 entrench Extreme Networks into broadband networking."
 
     About Extreme Networks
     Extreme Networks, Inc. delivers a simplified approach for building
 networks based on its corporate vision of Ethernet Everywhere(TM) networks.
 The Company's family of BlackDiamond(R), Alpine(TM), and Summit(R) switching
 solutions incorporate a unique combination of ExtremeWare(R) management
 software and an ASIC-based common architecture to provide Global 2000
 enterprises, telecommunications companies, Internet Service Providers and
 content providers with the ability to increase the flow of information and
 accommodate future network growth.
     Headquartered in Santa Clara, Calif., Extreme Networks was listed as the
 "Fastest Growing Company in Silicon Valley" based on three-year revenue growth
 by the San Jose and Silicon Valley Business Journal. For more information,
 visit www.extremenetworks.com.
 
     NOTE:  Extreme Networks, ExtremeWare, BlackDiamond and Summit are
 registered trademarks of Extreme Networks, Inc., and Alpine and Ethernet
 Everywhere are trademarks of Extreme Networks, Inc., in the United States and
 other countries.
     This announcement contains forward-looking statements that involve risks
 and uncertainties. Actual results could differ materially from those projected
 in the forward-looking statements as a result of certain risk factors,
 including, but not limited to:  (i) our limited history of profitability; (ii)
 possible delays in the development of new technology and products; (iii) the
 ability to procure components for products from single or limited sources;
 (iv) a dependence on third-party manufacturers, (v) a highly competitive
 business environment for network switching equipment; (vi) a reliance upon
 third-party distribution channels to sell products; (vii) fluctuations in
 demand for our products and services; and (viii) economic trends in worldwide
 geographic markets. More information about potential factors that could affect
 our business and financial results is included in our Annual Report on Form
 10-K for the year ended June 30, 2000, and the Quarterly Report on Form 10-Q
 for the period ended December 31, 2000, including (without limitation) under
 the captions, "Management's Discussion and Analysis of Financial Condition and
 Results of Operations," and "Risk Factors," which are on file with the
 Securities and Exchange Commission
 ( http://www.sec.gov ).
 
 
                             EXTREME NETWORKS, INC.
 
           PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per-share amounts)
                                  (Unaudited)
 
                                       Three Months Ended  Nine Months Ended
                                      March 31, March 31, March 31, March 31,
                                          2001      2000      2001      2000
 
     Net revenues                       $112,106   $67,310  $376,163 $169,534
 
     Cost of revenues                     57,534    31,971   185,398   80,748
     Gross profit                         54,572    35,339   190,765   88,786
 
     Operating expenses:
       Research and development           16,497     8,102    41,193   22,781
       Sales and marketing                41,578    14,798   117,192   38,180
       General and administrative         10,284     2,906    19,442    8,204
         Total operating expenses         68,359    25,806   177,827   69,165
 
     Operating income(loss)             (13,787)     9,533    12,938   19,621
     Interest and other income, net        2,864     4,401     9,378    9,841
 
 
     Income(loss) before income taxes   (10,923)    13,934    22,316   29,462
     Provision(benefit) for
      income taxes                       (3,823)     4,877     7,782   10,003
 
 
     Net income (loss)                  $(7,100)    $9,057   $14,534  $19,459
 
     Net income(loss) per share:
      Basic                              $(0.07)     $0.09     $0.13    $0.20
      Diluted                            $(0.07)     $0.08     $0.12    $0.18
 
     Shares used in computing
      per share calculation:
      Basic                              109,028   103,060   114,804   99,158
      Diluted                            109,028   113,584   118,091  110,654
 
     This statement of operations information for the three and nine month
 periods ended March 31, 2001 and 2000 is for illustrative purposes only and is
 not prepared in accordance with generally accepted accounting principles as it
 excludes the effects of the following (in thousands):
 
     During the three months ended March 31, 2001, certain inventory charges
      included in cost of revenues of $40,330.
     During the three months ended March 31, 2001, in-process research and
      development of $30,142, which resulted from the acquisitions of
      Optranet, Inc. and WebStacks, Inc.
     During the three months and nine months ended March 31, 2001, goodwill,
      purchased intangibles and deferred stock compensation of $8,239 and
      $22,101 respectively.
     During the three months ended March 31, 2001, restructuring and one-time
      charges of $5,737.
 
     Share and per share data have been restated to give retroactive effect to
     a two-for-one stock split in the form of a stock dividend effected in
     August 2000.
 
 
                             EXTREME NETWORKS, INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per-share amounts)
                                  (Unaudited)
 
                                       Three Months Ended   Nine Months Ended
                                      March 31, March 31,March 31, March 31,
                                          2001      2000      2001     2000
 
     Net revenues                      $112,106   $67,310  $376,163 $169,534
 
     Cost of revenues                    97,864    31,971   225,728   80,748
     Gross profit                        14,242    35,339   150,435   88,786
 
     Operating expenses:
       Research and development          16,642     8,102    41,338   22,781
       Sales and marketing               44,756    14,798   120,370   38,180
       General and administrative        11,839     2,906    20,997    8,204
       Goodwill, purchased intangibles
        and deferred stock compensation   8,239        --    22,101       --
       In-process research and
        development                      30,142        --    30,142       --
         Total operating expenses       111,618    25,806   234,948   69,165
 
     Operating income(loss)            (97,376)     9,533  (84,513)   19,621
 
     Interest and other income, net       2,005     4,401     8,519    9,841
 
     Income(loss) before income taxes  (95,371)    13,934  (75,994)   29,462
 
     Provision(benefit) for income
      taxes                            (25,256)     4,877  (18,474)   10,003
 
 
     Net income(loss)                 $(70,115)    $9,057 $(57,520)  $19,459
 
     Net income(loss) per share:
      Basic                             $(0.64)     $0.09   $(0.50)    $0.20
      Diluted                           $(0.64)     $0.08   $(0.50)    $0.18
 
     Shares used in computing per
      share calculation:
      Basic                             109,028   103,060   114,804   99,158
      Diluted                           109,028   113,584   114,804  110,654
 
     Share and per share data have been restated to give retroactive effect to
     a two-for-one stock split in the form of a stock dividend effected in
     August 2000.
 
 
                             EXTREME NETWORKS, INC.
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
 
                                                    March 31,       June 30,
                                                      2001           2000
                                                  (Unaudited)         (A)
                                      Assets
      Current assets:
       Cash, cash equivalents and investments        $145,428       $183,361
       Accounts receivable, net                        88,913         60,996
       Inventories, net                                63,186         23,801
       Deferred tax assets                             22,424         13,800
       Other current assets                            20,619         20,526
      Total current assets                            340,570        302,484
 
      Property and equipment, net                      52,258         26,750
      Long-term marketable securities                 103,936        124,144
      Goodwill and intangibles                        125,910         49,782
      Other long-term assets                           43,861         12,770
 
     Total assets                                    $666,535       $515,930
 
                    Liabilities and stockholders' equity
      Current liabilities:
       Accounts payable                               $37,731        $39,023
       Deferred revenue                                46,328         22,042
       Accrued liabilities                             47,818         35,538
      Total current liabilities                       131,877         96,603
 
      Long term deposit                                   266            306
 
      Total stockholders' equity                      534,392        419,021
 
     Total liabilities and stockholders' equity      $666,535       $515,930
 
     (A) Derived from audited financial statements at June 30, 2000
 
 SOURCE  Extreme Networks, Inc.