Extreme Networks replaces CEO, lays off 70

Ethernet switch vendor Extreme Networks is replacing its CEO and laying off 70 employees in an effort to quickly improve the company’s bottom line and set it up to run profitably with lower revenues.

CEO Mark Canepa, who took the position in 2006, has resigned, but will remain for a short period to help recently hired CFO Bob Corey transition to Acting CEO. The company is seeking a permanent replacement. Canepa receives US$639,354 severance.

As part of the restructuring, the company also eliminated the job of chief counsel, getting rid of Robert Schlossman, and replacing him with vice-president Diane Honda, according to a filing this week with the Securities and Exchange Commission. Judging from the company Web site, the head of human resources and head software developer are also gone.

The company didn’t say where the 70 layoffs would come, but it represents about 9 per cent of Extreme’s workforce.

The moves will lower the company’s expenses by US$2.5 million per quarter, with the larger goal being to have the company break even if it makes US$70 million per quarter. The measures will cost the company a one-time US$4.2 million hit.

The company hasn’t reported its financial statement for the quarter ended Sept. 27, but it said earlier this month that it expected to come up SU$14.4 million shy of what Wall Street analysts forecasted. The analysts projected Extreme would take in US$66 million but the actual revenues will be more like US$80.4 million, the company said.

A the time Canepa blamed the company’s North American business as being particularly soft because some deals it had hoped for fell through and others were delayed beyond the end of the quarter. The company’s stock prices hit a low of close to a dollar in March, struggled back to just over US$3 last month then dipped to about US$2.25 over the past weeks.

“They’re in a tough spot,” says Zeus Kerravala, an analyst with Yankee group. “This is a company that’s truly having a hard time finding its way.” He says the company is smaller than its main competitors, HP, IBM, Cisco, Juniper and Brocade (which has reportedly put itself up for sale).

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Jim Love, Chief Content Officer, IT World Canada

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