I was ready to give up on Extreme Networks
Extreme fired back by explaining that Ethernet is still very much alive and well, and it could be a profitable niche for a highly specialized player -- such as Extreme Networks.
Here we are three months later, and Extreme's shares are doing their best Mexican jumping bean impression by jumping as high as 7.3% on a fairly spiffy second-quarter report. Not fantastic, mind you -- just decent.
Sales grew by 7.2% year over year to $85.1 million, barely clearing the bottom end of management's own guidance. Non-GAAP earnings made a similarly timid improvement from $0.05 per share to $0.06 per share.
CEO Oscar Rodriguez, who has been on the job for a mere five months, says that he has completed a review of the company's strategy. As part of a cost-savings effort, 5% of Extreme's headcount was chopped in January. That move is expected to boost earnings by $2 million per quarter once all the severance and reorganizational charges have been cleared out of the system, which sounds like a perfectly reasonable tactic.
The cuts appear to be trimming the fat, too -- not tearing right into the meat of the operation as many tech firms have been known to do, Hewlett-Packard under Mark Hurd being the finest (or worst) example of this misguided move. Extreme is presumably not firing the engineers who create the company's lifeblood, but plans to increase its engineering headcount by 20% "over the coming quarters."
That's exactly what Extreme needs to be doing in order to stand a chance against Cisco or Alcatel-Lucent
Add Extreme Networks to your watchlist and keep track of the company's preposterous quest.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. Juniper Networks is a Motley Fool Big Short short-sale selection. The Fool has created a bull call spread position on Cisco Systems. Motley Fool Alpha has opened a short position on Juniper Networks. Motley Fool Alpha owns shares of Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.