Extreme Networks slashes 16 percent of workforce; mass layoffs at Cisco expected

Extreme looking to cut US$20 million in expenses; Cisco also cost-cutting

Looking to cut $20 million in expenses, Extreme Networks this week said it will cut 110 employees, or 16 percent of its worldwide workforce.

The networking equipment vendor hopes the move will allow it to achieve consistent double digital operating income. The company will take a pretax restructuring charge of US$3.5 million in its fiscal fourth quarter, which ended July 3.

Extreme is reducing headcount in all functional areas outside of R&D. The company said it will be consolidating most of its software engineering into current facilities in lower-cost venues to bolster R&D investment in product development.

It expects the consolidation to be complete by the end of the calendar year.

Over the past few years, its revenue share of the $20 billion Ethernet switch market consistently below 2 percent. Industry leader Cisco has 65 percent to 70 percent share, while HP is second with just over 11 percent.

Extreme and a handful of other companies, including Juniper, Brocade and Enterasys, make up the remainder, but each has about 2 percent or less market share.

Earlier this year, Extreme realigned sales and marketing to focus on select vertical markets.

In recent weeks, the company named a new vice president of engineering and replaced its marketing chief. In March, it replaced its CFO with an interim CFO while conducting a search for a new financial chief. That search is ongoing.

President and CEO Oscar Rodriguez has been at the helm for less than a year. Extreme laid off 9 percent of its workforce in late 2009 and replaced then CEO Mark Canepa with an interim CEO until Rodriguez was tapped to lead the company last August.

Extreme's market capitalisation is less than its annual revenue, and the company is growing less than the industry as a whole.

But Extreme also announced this week that it anticipates fourth quarter revenue will be above prior guidance, and in the range of $88 million to $90 million. Earnings, however, will fall short of prior guidance, the company said.

Extreme announces its fourth quarter results August 1.

Extreme Networks' New Zealand customers include TelstraClear.

Meanwhile, Cisco Systems is believed to be planning significant staffing cuts.

- Additional reporting by David Watson

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