Please ensure Javascript is enabled for purposes of website accessibility

Why Extreme Networks Stock Tanked Today

By Evan Niu, CFA - Jan 29, 2020 at 12:54PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The networking company reported worse-than-expected revenue and a leadership shake-up in its sales organization.

What happened

Shares of Extreme Networks (EXTR 3.01%) have tanked today, down by 10% as of noon EST, after the company reported fiscal second-quarter earnings results. The enterprise networking specialist also said that Chief Revenue and Services Officer Robert Gault would be departing.

So what

Revenue in the fiscal second quarter increased 6% to $267.5 million, which was shy of the $273.2 million in sales analysts were modeling for. That all translated into adjusted earnings per share of $0.13, which was right on target with the consensus estimate.

Red stock chart going down

Image source: Getty Images.

The tech company is also overhauling its sales organization. Extreme Networks had restructured its sales team last summer, which "created disruption that impacted near-term results," CEO Edward Meyercord said on the conference call with analysts. Gault's departure is related to leadership changes around the company's salesforce, and Extreme Networks has now "consolidated leadership under Pete Doolittle." 

Now what

Gault will remain with Extreme Networks for about another month to assist with the transition and release all claims against the company as part of his separation agreement, receiving over $450,000 in cash payments in the process. Extreme Networks also tweaked its guidance and hopes to improve its adjusted operating margin.

"With our revised guidance we now expect to achieve Non-GAAP operating income margins in the 12-13% range by the end of fiscal year 2020," Meyercord said in a statement. "We expect to attain organic growth and our 15% Non-GAAP long term operating margin target in the second half of calendar year 2020."

Revenue in the fiscal third quarter is expected to be $255 million to $265 million. Wall Street was projecting $275.3 million in sales.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Extreme Networks, Inc. Stock Quote
Extreme Networks, Inc.
$9.57 (3.01%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.