Extreme Networks (EXTR) 8-K Extreme Networks Reports Increased Revenue and Profitability

Exhibit 99.1

FOR IMMEDIATE RELEASE

For more information, contact:
Extreme Networks
Investor Relations	Public Relations
408/579-3030	408/579-2963
investor_relations@extremenetworks.com	vbellofatto@extremenetworks.com

EXTREME NETWORKS REPORTS INCREASED REVENUE AND PROFITABILITY

SANTA CLARA, Calif., Oct. 20, 2004– Extreme Networks, Inc. (Nasdaq: EXTR), a leader in open converged networks, today announced financial results for its fiscal first quarter ended Sept. 26, 2004.

Net revenue for the first quarter of fiscal 2005 was $95.1 million, up three percent from $92.2 million in the fourth fiscal quarter of 2004, and up nine percent from $87.4 million in the year-ago first quarter. On a GAAP basis, the Company recorded net income of $4.1 million or $0.03 per diluted share in the first fiscal quarter of 2005, up from the net income of $2.6 million or $0.02 per diluted share in the first fiscal quarter of 2004.

“Our positive financial results represent another quarter of market adoption for our innovative switching solutions that Enterprises and Metro Service providers are using to build open converged networks,” said Gordon Stitt, president and CEO of Extreme Networks. “We are very pleased to have increased revenue, profitability, gross margins and cash flow, while controlling our expenses.”

Operating income for the first quarter of fiscal 2005 totaled $4.7 million, an operating margin of 5.0 percent of net revenues, up from $1.2 million or 1.4 percent of net revenues in the year-ago period. The Company’s improved operating margin was the result of higher revenues, expanded gross margins, and decreased operating expenses as a percentage of sales. Total gross margin was 53.2 percent of revenues during the fiscal first quarter of 2005, compared to 52.5 percent in the fiscal fourth quarter of 2004, and 51.4 percent in the year-ago first quarter. Operating expenses declined to 48.2 percent of revenues, from 56.4 percent in the fiscal fourth quarter of 2004, and from 50.0 percent in the year-ago first quarter.

Cash and cash equivalents, short-term investments, and marketable securities increased to $439.9 million during the quarter, up from $425.7 million at the end of the fiscal fourth quarter 2004, and up from $403.3 million at the end of the fiscal first quarter of 2004.

Revenues in the U.S. were $40.4 million in the first quarter of fiscal 2005, or 42 percent of total consolidated revenue; international revenues were $54.7 million or 58 percent of total consolidated revenue. In the first quarter of fiscal 2004, revenues in the U.S. were $36.4 million, or 42 percent of total consolidated revenue; international revenues were $51.0 million, or 58 percent.

Management Expectations

For the quarter ending Dec. 26, 2004, the Company currently anticipates that its revenues will be up one to five percent relative to the Sept. quarter just completed. The Company anticipates that gross margin as a percentage of net revenue will be similar to the 53.2 percent reported in Sept. The Company anticipates total operating expenses will be in a range of $46 to $47 million.

New Customers

• The State of Florida Department of Transportation District Five became the latest agency to deploy Extreme Networks’ open convergence network solution. They installed a converged network, the Intelligent Traffic Management System, to manage IP video and data applications reaching from as far as Disney World to Daytona Beach using Extreme’s BlackDiamond, Alpine and Summit switches.

• Britain’s Trader Media, which publishes the popular Auto Trader books, magazines, as well as the UK’s busiest automotive website, chose Extreme Networks for a high-performance infrastructure. The Extreme network provides Gigabit Ethernet connections at the edge of the network to manage the more than two million monthly user visits.

• Extreme Networks’ carrier-class resiliency allows KAMO’s K-PowerNet to deliver a reliable, multi-state Metro network to better serve customers. This leading-edge data, voice and video service provider in the four-state metropolitan areas in Kansas, Arkansas, Missouri and Oklahoma, is using Extreme Networks’ innovative Ethernet Automatic Protection Switching (EAPS), which delivers sub-50 millisecond recovery on ring-based routed or switched Gigabit Ethernet networks.

• Extreme Networks was also selected by Oakland County, Michigan to provide a leading edge Ethernet network infrastructure for its e-Government initiative. The new Extreme Metro network replaced an ATM infrastructure and will be used to run converged applications, such as point-to-point IP video streams.

• Extreme Networks and one of the UK’s leading communications companies, Call Center Technology (CCT), formed a strategic partnership to deliver converged voice and data communications solutions. The partnership brings together CCT’s expertise in IP telephony technology and applications from Avaya with Extreme Networks’ high performance Ethernet switching expertise. CCT will resell Extreme Networks’ portfolio of high-performance communications solutions while providing a single point of contact for customer consultancy, sales, services and support.

Conference Call

Extreme Networks will host a conference call to discuss these results today at 5:00 p.m. EDT (2:00 p.m. PDT), for more information visithttp://www.extremenetworks.com/aboutus/investor/Financial and statistical information to be discussed during the conference call are posted on the Investor Relations section of the Company’s website (www.extremenetworks.com).

Extreme Networks

Extreme Networks is a leader in open converged networks. Its innovative network architecture provides Enterprises and Metro Service Providers with the resiliency, adaptability and simplicity required for a true converged network that supports voice, video and data, over a wired and wireless infrastructure, while delivering high-performance and advanced security features. For more information, please visitwww.extremenetworks.com

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Extreme Networks, ExtremeWare, BlackDiamond, Summit and Alpine are registered trademarks of Extreme Networks, Inc., in the United States and other countries. All other marks are the property of their respective holders.

This announcement contains forward-looking statements that involve risks and uncertainties, including statements regarding our expectations for future operating results. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including, but not limited to: our effectiveness in controlling expenses, fluctuations in demand for our products and services; a highly competitive business environment for network switching equipment; the possibility that we might experience delays in the development of new technology and products; customer response to our new technology and product; and a dependency on third parties for certain components and for the manufacturing of our products. We undertake no obligation to update the forward-looking information in this release. More information about potential factors that could affect our business and financial results is included in our filings with the Securities and Exchange Commission, including, without limitation, under the captions: “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors,” which is on file with the Securities and Exchange Commission (http://www.sec.gov).

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per-share amounts)

(Unaudited)

	Three Months Ended
	September 26, 2004		September 28, 2003
Net revenues:
Product	$	81,172	$	76,756
Service		13,914		10,615
Total net revenues		95,086		87,371
Cost of revenues:
Product		36,302		33,432
Service		8,228		9,036
Total cost of revenues		44,530		42,468
Gross margin:
Product		44,870		43,324
Service		5,686		1,579
Total gross margin		50,556		44,903
Operating expenses:
Sales and marketing		23,230		21,825
Research and development		15,399		13,297
General and administrative		7,123		7,031
Amortization of deferred stock compensation		62		552
Restructuring charge		—		962
Total operating expenses		45,814		43,667
Operating income		4,742		1,236
Other income, net		138		2,299
Income before income taxes		4,880		3,535
Provision for income taxes		754		920
Net income	$	4,126	$	2,615
Net income per share — basic	$	0.03	$	0.02
Net income per share — diluted	$	0.03	$	0.02
Shares used in per share calculation — basic		120,636		116,621
Shares used in per share calculation — diluted		123,376		118,822

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	September 26, 2004		June 27, 2004
Assets
Current assets:
Cash and cash equivalents	$	66,341	$	59,164
Short-term investments		146,461		162,078
Accounts receivable, net		28,788		32,998
Inventories		23,946		25,889
Prepaid expenses and other current assets		9,670		8,051
Total current assets		275,206		288,180
Property and equipment, net		57,485		59,767
Marketable securities		227,078		204,430
Other assets		25,426		26,896
Total assets	$	585,195	$	579,273
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	20,444	$	18,995
Deferred revenue		50,592		53,674
Accrued warranty		9,070		8,297
Other accrued liabilities		49,253		47,188
Total current liabilities		129,359		128,154
Other long-term liabilities		19,609		21,561
Convertible subordinated notes		200,000		200,000
Total stockholders’ equity		236,227		229,558
Total liabilities and stockholders’ equity	$	585,195	$	579,273

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	September 26, 2004			September 28, 2003
Cash flows from operating activities:
Net income	$	4,126		$	2,615
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		4,392			5,301
Provision for doubtful accounts		—			(200	)
Amortization of warrant		1,892			—
Amortization of deferred stock compensation		62			552
Restructuring charge		—			962
Loss on disposal of fixed assets		50			—
Changes in operating assets and liabilities:
Accounts receivable		4,210			(364	)
Inventories		1,943			2,739
Prepaid expenses and other current and noncurrent assets		(2,041	)		6,994
Accounts payable		1,449			(10,015	)
Deferred revenue		(3,082	)		915
Accrued warranty		773			(1,363	)
Other accrued liabilities		113			(5,786	)
Net cash provided by operating activities		13,887			2,350
Cash flows from investing activities:
Capital expenditures		(2,160	)		(2,295	)
Purchases and maturities of investments, net		(5,955	)		339
Net cash used in investing activities		(8,115	)		(1,956	)
Cash flows from financing activities:
Proceeds from issuance of common stock		1,405			1,458
Net cash provided by financing activities		1,405			1,458
Net increase in cash and cash equivalents		7,177			1,852
Cash and cash equivalents at beginning of period		59,164			44,340
Cash and cash equivalents at end of period	$	66,341		$	46,192