Extreme Networks shares sink after 1Q forecast

Extreme Networks sinks after weak 1st-quarter sales forecast; analyst sees rising competition

• On 11:08 am EDT, Tuesday October 6, 2009

NEW YORK (AP) -- Shares of Extreme Networks Inc. sank Tuesday after the network equipment maker projected sales for the quarter will fall well below Wall Street forecasts.

The stock dropped 40 cents, or 13.9 percent, to $2.47 in morning trading. Shares have traded between $1.06 and $3.13 over the past year.

"We believe investors should be wary of Extreme until revenue and operating margins show consistent improvement," JMP Securities analyst Samuel Wilson told clients in a note Tuesday, keeping a "Market Perform" rating on shares.

Monday evening, the company said it expects to report $66 million in sales for the three months ended Sept. 27. On average, analysts expected $80.4 million, according to Thomson Reuters.

"We believe the primary reason behind the revenue shortfall was poor execution and rapidly intensifying competition," Wedbush Morgan analyst Rohit Chopra wrote.

Chopra, who has an "Underperform" rating on the stock, pointed out a rising threat to the company's network switches segment from Cisco Systems Inc., Hewlett-Packard Co., 3Com Corp., Juniper Networks Inc. and Brocade Communications Systems Inc.

He cut his price target for Extreme Networks to $2 from $2.50.