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Extreme Sinks on Slowdown Call

The networking company sees a gradual second-half improvement, but first-quarter sales may be flat.

Extreme Networks (EXTR) - Get Extreme Networks, Inc. Report fell 6% early Thursday after posting a fourth-quarter profit and warning of a possible slowdown in first-quarter sales growth.

For its quarter ended June 27, the maker of Internet gear posted a profit of $2.3 million, or 2 cents a share. That reverses the year-ago loss of $167 million, or $1.44 a share. The year-ago quarter was weighed down by a tax valuation charge, and the latest period included an assortment of charges and gains. Before those items, the latest-quarter operating profit was $1.9 million.

Revenue rose 6% from a year ago to $92.2 million. Results were in line with Wall Street's expectations: A Thomson First Call survey pointed to second-quarter earnings of less than a penny a share on revenue of $91.6 million.

Extreme said it expects the second half of calendar 2004 to bring "a gradually improving environment for networking vendors."

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Extreme said it expects fiscal first-quarter revenue to be flat to 5% above fourth-quarter levels, which puts the company's guidance at the low end of Wall Street's $94 million estimate. The company also forecast a decline in gross profit margins, "due to anticipated changes in the mix of product and channel shipments."

On Thursday, shares of the Santa Clara, Calif., company fell 32 cents to $5.26.