Updated from April 14

Extreme Networks ( EXTR) posted stronger-than-expected fiscal third-quarter sales Wednesday.

The Santa Clara, Calif., computer networking shop also said its top line could grow as much as 5% sequentially in the fiscal fourth quarter, a shade better than Wall Street analysts had expected. The stock surged 10% in postclose trading before settling down Thursday, when it slipped 9 cents to $7.37.

For the third quarter ended last month, Extreme posted a loss of $1.1 million, or a penny a share, on revenue of $88.9 million. That compares with a 4-cent loss on revenue of $83.4 million in the previous quarter, and a 5-cent loss on sales of $85.2 million in the year-ago period.

Analysts had expected a penny-a-share loss on $87 million in sales, according to a Reuters Research tally. Extreme makes Ethernet routers and switches used to deliver office data traffic.

"We increased revenue, expanded gross margins and tightly controlled our operating expenses," said CEO Gordon Stitt in a press release. "We are pleased with our results for the quarter."

Investors appeared most impressed by the company's success in squeezing out costs. Indeed, despite a sluggish economy and limited corporate spending, Extreme was able to boost its profit margins substantially.

Gross margins rose to 51.2% of sales in the third quarter, from 48.5% in the second quarter and 39.8% in the year-ago period.

Though Extreme is a small, specialized tech supplier, investors often view its results as predictive of how the networking business is faring. Shares of data networking giant Cisco rose 8 cents to $23.34 in the postclose market, after dropping 2% during the regular session.