| Earnings Scorecard |
| Actual | Estimated* | Year-Ago |
| $0.11 | $0.11 | $0.06 |
| *By First Call/Thomson Financial |
Updated from 4:54 p.m. EST
Extreme Networks (EXTR Quote - Cramer on EXTR - Stock Picks) Wednesday met Wall Street's earnings expectations but only slightly exceeded revenue targets, raising investor concerns about its growth prospects.
The networking gear maker said fiscal second-quarter earnings were 11 cents a share, dead even with the consensus estimate according to
First Call/Thompson Financial. Fiscal second-quarter revenue rose 21% from first-quarter levels, to $144.7 million, and 163% over year-ago revenue of $55 million. Analysts had expected revenue of $142.3 million.
Many investors were looking for a blowout revenue number and failed to get it. "We were looking for $145.7 million in revenue," says Michael Jung of
SG Cowen. "Unlike
Juniper (JNPR Quote - Cramer on JNPR - Stock Picks) and
Redback (RBAK Quote - Cramer on RBAK - Stock Picks), they didn't deliver an upside surprise that people were hoping for." (Jung rates Extreme shares neutral, and SG Cowen was one of the underwriters of a recent stock offering by the company.)
Extreme shares dropped to $42 in after-hours trading. During regular trading, Extreme was up $4.69, or 10%, to $47.87.
Extreme sells Net switches and gigabit Ethernet devices to corporations and telecommunications service companies. These boxes are data communications gear that carry Internet traffic and connect with other computer systems. The networking industry is witnessing a slowdown in spending as corporate and telecommunications companies begin to conserve cash and pull back spending on new equipment.
The company is expected to give guidance on the outlook for its business next quarter and the remainder of the year on a conference call with analysts Wednesday evening.
Among the concerns going into the call is how well Extreme managed to decrease its inventory from the fiscal first quarter, when inventory more than doubled to $59 million from $24 million in the pervious quarter. This stockpiling was common among several networking outfits as they braced for increased demand.
More than half of Extreme's inventory buildup was finished products as opposed to raw materials, suggesting demand wasn't quite as strong for the switching gear as expected.
Scott Moritz
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