What: Shares of infrastructure equipment company Extreme Networks (NASDAQ:EXTR) popped 9% on Thursday after its quarterly results and outlook topped Wall Street expectations.
So What: Extreme shares have been walloped over the past year on sharply slumping revenue, but a wide Q4 beat -- EPS of $0.10 on revenue of $150.6 million vs. the consensus of a $0.03 loss and revenue of $127 million -- coupled with upside guidance suggest that management's turnaround initiatives are starting to gain traction. Extreme said that the U.S. government's eRate program -- which provides discounts to assist schools and libraries to obtain affordable telecommunications -- is nicely bolstering results, giving investors a much-needed reason to be optimistic about its growth prospects going forward.
Now What: Management now sees Q1 adjusted EPS of $0.01-0.05 on revenue of $120 million-$130 million, versus the analyst consensus of $0.01 and $122.4 million. "After successfully streamlining our organization, reducing costs and sharpening our focus on a solutions-based strategy, we enter fiscal 2016 on solid footing," said President and CEO Ed Meyercord. "We anticipate E-Rate will have a positive impact to our US based business in fiscal 2016, however the pace at which the government funds the requests will dictate the timing and impact to our business." When you couple that bit of domestic uncertainty with the significant currency and competitive headwinds that Extreme continues to face overseas, conservative Fools would probably do well to remain on the sidelines.
Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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. The Motley Fool has a disclosure policy.
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